What Influences your Credit Score?
There are quite a few things that influence your credit score, and it is important to know about them. How long you have had credit is a factor. If you have an older credit card that you don’t use, don’t be tempted to cancel it. If you do, and it is a very old account, then your credit score may drop. By keeping those older accounts you establish some longevity. If you are young or new to getting credit, then it will just take time to build up those accounts and you have to be patient.
The amount of money you owe to creditors will influence your overall credit score. The more money that you owe, the more that you will see it drop. Some people worry though when they buy a new car or get a home loan that it will drop considerably. Most of the time, it won’t be too bad. If you have tons of creditors though and owe lots to all of them then your score is going to be less than it otherwise would be.
Available credit influences your credit score as well and many people don’t realize this. For example if you have access to R25,000 in credit cards that can lower your score. Even if you only owe R2,000 on them they look at the potential you have to incur more debt than you have right now. This is why you only want to have a couple of credit cards for emergencies. Don’t apply for every card that you get an offer for including those department store cards.
If you make your payments on time or you are late influences your credit score a great deal. If you are more than 30 days late on a bill it will be a red flag that you are in trouble with your finances. If you have several accounts that show up this way or one that is continually late it will reduce your credit score a great deal. Paying your bills on time is one of the best ways to get your credit score to improve.
Number of creditors is looked at because it appears you owe money to everyone out there when you have lots of them. It gives the impression that you don’t have very much disposable income to work with as you are already very thin with your funds. Work to pay off accounts and then roll over that money into the next one and pay it off. This will get you a higher credit score over time.
Number of checks on your credit will also influence your credit score so limit those checks. Don’t apply with this lender and then that one until you get approved. Instead, try to match up what you need with a lender that can offer it. By applying fewer times you will keep your score up. Some people worry that if they get a credit report for free annually that reduces the score but it doesn’t. If a potential employer looks at your credit before they offer a job, that won’t have a negative impact on it either.