Understanding Your Credit Score Information
Credit score info allows lenders in order to gauge a credit applicant if he or she is worth the chance of availing credit. After all, credit establishments are into a business and would want to make money from their investments with regards to lending their money sources. It is just fair which they try to lend it to people who are liable enough to pay them back later on.
Lenders as well as credit institutions try to evaluate each credit application simply by looking at the applicant’s credit score information. Through that, these institutions should be able to determine if an applicant is worth the risk. The credit report is obtained from details that is based on previous credit activities of the candidate as well as other related info. All these can be found about the applicant’s credit report.
Any credit score is determined base don the many information contained in the credit record. Different factors come into play each time a credit score is determined. A designed formula is used by credit credit reporting agencies to come up with the particular credit score. The formula takes into account the information in the credit report, both the good and the bad entries to come up with the right score.
In order for this kind of score to be calculated, the credit report must at least have 1 account for at least 6 months as well as one that may be updated for the same period of time. This will ensure that there is certainly enough recent information in the credit report by which to base their information.
Payment history makes up about about 35 percent of the credit score. This includes punctually payments as well as past due one which is considered when calculating the credit report. Public records that find its way into the particular credit report such as amount you are behind payments, bankruptcies, law suits, etc. may also be considered when computing for the credit score.
The amount of credit that you have availed in the past is the reason about 30 percent of the credit score. Not only may be the total amount looked at but also the amount borrowed through different accounts. The particular balances on certain accounts may also affect the credit score. Maintaining a little balance for example, will have a positive effect on the actual credit report and may help to keep your credit score upwards.
The length of your credit history is the reason 15 percent of your credit report. Your oldest consideration and the average age of your other accounts are taken into consideration whenever computing for your credit score. Also being considered is the length of time that has passed since you have used certain accounts.
The amount of new credits utilized account for about 10 % of your credit score. This consists of the length of time that has passed since you have opened up a new account. Furthermore considered for this is the number of credit requests that you’ve made in a one year period. Credit report inquiries from lenders are also taken into account when computing for your credit score.
The sorts of credit that you have availed accounts for 10 percent of the credit rating information that adopts the calculation with the credit reporting agencies. Revolving credit in terms of credit card debts in addition to installment credit in terms of unsecured loans and mortgages tend to be taken into account when calculating for your credit score.
The formulas used are usually proprietary tools used by the different credit reporting agencies in calculating for your credit score. But more or less, this is how the information within the credit report is used to generate a viable credit report to assess your credit risk.