WHAT FACTORS AFFECT YOUR CREDIT REPORT AND
YOUR CREDIT SCORE

It is normal practice to issue credit reports annually with the credit score appearing at the bottom. A credit score generally ranges between 350 and 800 depending on the credit performance of an individual during his credit history up-to-date.

What Specific Factors Determine Your Credit Score?

A credit score depends on your performance within certain areas of credit activities that are assigned different weights in proportion to the importance they bear in the final composition of a fair and reasonable credit score. The main criteria considered in the calculation of a credit score are the age and composition of various credit activities in one’s outstanding debts with their ages, credit history, new credits received and types of credit, inquiries received from lenders, refusal of loans etc.

The main criteria considered comprises of the credit history, which is assigned a weight of thirty five percent since it might include information relating to your credit performance during a long drawn out period. Provided you have not made any late or missed payments or not made any pleas for bankruptcy, you should score heavily under this category. 

Next category is outstanding debts, assigned a weight of thirty percent. If any loan has been repaid over a long period, it could he a house mortgage or a vehicle loan. If it is already fully settled, then you could get a very good score. Even if it is still outstanding, you could still get a good score if you had never been delinquent in your repayments. However, a loan taken more recently where you have still not commenced repayments could undo the good work done earlier.

The third category which is on the age of your credit is assigned a weight of fifteen percent; If you have been repaying your debts over the last four or five years without any default, then it speaks a lot for your creditworthiness and you would get a good score; unlike another person who has just started, and has not made any repayments so far.

If the credit records show that you have inquired regarding new loans from prospective lenders without any tangible results, it indicates that your requests for loans have been rejected, which is bad for your credit score. The weight assigned to this category is ten percent.

Finally, a weight of ten percent is assigned for the credits of different types you are having.  Good long term credit would earn a good score here too. However if you are having a lot of revolving credit like credit cards, where you always draw up to the optimum credit limits allowed and make minimum payments, it does not reflect well on your financial discipline. Hence, you may not score here. If you wish to score under this category, have one or two credit card accounts instead of several and do not exceed around twenty five percent of your credit limit on the average and always settle the credit card balances in full.

Is 700 A Good Credit Score?

An overall credit score of 700 or above would ensure that you get the loans as applied for at very low rates of interest; whereas even if you are marginally below that level, you are likely to be granted loans subject to repayment with higher rates of interest.

One good thing about credit reports and credit scores is that that they vary and do not stay fixed forever. If your credit rating this year is not that good, you could certainly improve over it the next year; since you are now aware what factors earn you points and what factors don’t. So if you tighten up the loose ends and keep working at it, the future is all yours with a credit score that is good!

Tip To Raise A Credit Score

Here is some positive advice to attain a useful credit score at least the next year! Settle all your outstanding debts. If your credit score appears to be erroneous, report it immediately, get it investigated and rectified. Curb your expenses and try to earn some extra income during your free time.

You can turn to friends and relatives for assistance to settle your debts or you could go to a credit advisory firm.

Always try to attain a minimum credit score of 700. Remember that all copies of credit reports are given free of charge by any or all of the three Credit Agencies, namely Expedia, Transunion and Equifax. Although the final verdict from all three would be the same, it would be advantageous to obtain all three reports for purposes of comparison with regard to inner details.