A credit score is a number calculated by computer models that analyze your credit reports. The models are designed to help lenders determine your creditworthiness, or how likely you are to pay back a debt. 아파트담보대출
There are many factors that go into your credit score, ranging from your bill paying habits to the age of your debts. Here are five things that may affect your score:
Payment History
The payment history of credit cards, banks loans and other accounts is one of the most important pieces of information used to calculate a credit score. It reveals whether you’ve paid on time, have had any accounts go to collections or have filed for bankruptcy. A record of consistent on-time payments is the best way to build a good credit score, but building this takes time and diligence.
Lenders want to know that if they lend you money, you’ll pay them back on time. That’s why your payment history makes up 35% of your credit score. Late payments can hurt your score, but only if they’re at least 30 days past due. That’s because lenders are legally allowed to only report a late payment to the credit bureaus once it’s been at least 30 days past due.
Credit Utilization
Credit utilization, which accounts for about 30% of your FICO(r) score, measures the amount of debt you have on revolving accounts like credit cards and home equity lines of credit (HELOCs) compared to the total credit limit available. Lenders want to see low credit utilization because it indicates responsible borrowing habits.
To calculate your credit utilization, tally up the balances on all your revolving accounts and add them together. Then divide the sum of all your outstanding balances by the total credit limit on those revolving accounts and multiply by 100. You can track your ratio on a per-card basis and on your overall credit report. Credit scoring models typically favor a lower credit utilization ratio, especially one in the single digits. Maintaining low balances will also help you qualify for credit card and loan discounts, easier approval and more. The simplest way to improve your credit utilization is to pay down your balances before the end of each billing cycle.
Length of Credit History
The length of your credit history makes up 15% of your credit score. This factor is calculated by adding up the ages of your oldest and newest accounts (both open and closed) and then dividing by the total number of accounts.
Credit scoring companies use different formulas for this calculation, but the general rule is that a longer credit history generally results in a higher credit score. This is true even when other factors like payment history and amounts owed are equal.
Keep in mind that opening new accounts or closing old ones can shorten your credit history, lowering your credit score. So if you have the option, try to stick with your oldest accounts – especially those that don’t carry an annual fee. This will help you maintain a long credit history while keeping your credit utilization low. This can give you the best of both worlds when applying for new loans and credit cards.
New Credit
In the “new credit” category of your score, scoring models consider how recently you applied for a loan or credit card. This factor accounts for 10 percent of your FICO and VantageScore scores. If you apply for many new credit cards or loans within a short period of time, it can have a negative impact on your score. This is because when you apply for credit, the credit bureaus or lenders will make a hard inquiry on your credit report, and this can cause your score to go down temporarily.
The good news is that most hard inquiries remain on your report for only 12 months, and soft inquiries don’t have any effect at all. So, if you’re in the market for a loan or new credit, it’s best to shop around over several weeks or even a few months. This way, you can avoid multiple hard inquiries and keep your credit score intact. Just remember that payment history and debt utilization carry more weight in your score than new credit.