Credit experts reveal shocking factors that impact your credit score
A credit score ranges from 300 – 850. This score is used to understand the risk profile of the borrower. In other words, through credit score, the lender tries to judge how likely the borrower is going to repay his outstanding debt. Many people find that it is difficult to maintain a good credit score.
We have listed down 5 factors that severely affect credit scores. If you can manage these factors, then you will see an improvement in your credit score.
Outstanding Debt and Liabilities
- Generally, you should always keep your outstanding debt and liabilities less than 30%. In simpler terms, your credit limit utilization shouldn’t be more than 30%. If you repay outstanding liabilities, you can quickly improve your credit score.
Experts indicate that your payment history can affect your score by a staggering 35%. If you’ve made your payments on time and have avoided any penalties, you’re in the green zone. However, if you’ve missed payments or have been charged with penalties, your score is going to suffer a lot.
- Similarly, if there are incidents such as repossessions, foreclosures, and tax liens in your history then your credit score will be low.
Unborrowed Credit & Credit Mix
The higher the unborrowed credit, the higher your score will be. If you have low unborrowed credit, then you have two options. Either you can start repaying the credit or you can increase your credit limit. Either of these actions will result in an improvement in the credit score.
- Credit Mix basically refers to the different types of credits and liabilities on your reports. Experts indicate that if a borrower has a mix of revolving credit and loans on their payment history, it will signal his experience in managing debt.
People having only one type of credit or the ones that have no credit cards are viewed as high-risk individuals. They often find it difficult to get approvals for new credits.
- If you have ever failed to repay a credit due to zero balance, this will appear as a payment default. Usually, you will have some grace period before the penalties are imposed. However, payment defaults are always mentioned on credit reports and can seriously affect your credit score. This will additionally prevent you to get approval for a good credit rating item.
History of Credit
Your credit history contributes to as much as 15% of your overall score. If you have a long history of credit, it is going to be in your favor. It basically exhibits that you have experience handling credit. However, if you have borrowed a lot in a short amount of time, your credit score is going to be low.
- If you want to fix this, you should close accounts and open a smaller number of new accounts.
For every reporting period, your financial situation is going to be different. Consequently, your credit score is also going to vary. Despite making payments on time, you might have noticed your credit score is declining and you want urgent approval for something that requires a better credit score than yours.
- To solve this problem, you must consider hiring a credit repair company. Credit repair companies have better access to information as well as years of experience in dealing with such scenarios.
A good credit repair company such as Credit Repair Today will help you by considerably improving your credit score. They have industry accreditations as well as a team of experts who will advise the best course of action for improving your case. They offer a free credit analysis, comprehensive service plans, and a money-back guarantee!