Credit Scores: Important Factors
Want to buy a home, car or insurance, or looking for a mortgage? First, make sure you have a good credit
score. There are people who might glance over it when they are in need, but the growing importance of
credit scores have a significant role to play in one’s financial life. Credit scores cannot be ignored, as they
also determine the interest rate one has to pay on credit cards.
Credit score determines credit worthiness
Experian, Transunion and Equifax are the three bureaus providing official scores gathered from the
lenders. Each of these agencies provides free credit scores annually to individuals. A free credit check
will make you more aware of your credit worthiness. Usually the lower limit of the score is 350 while the
highest is 850. You need to have keen eye on your scores as you are weighted by lenders and scores are
What can alter credit scores?
Late payments have a bad impact on scores and will bring them down greatly. Payment history has a
35% role in calculating a credit score. So you should pay attention to making payments on time.
High amount on credit cards
You can ruin your score if you carry a high balance on your credit cards. Make sure that you never spend
over 40% of your available balance, as large amounts hamper the debts utilization ratio. Charge only
what you can pay monthly, as it can make the difference in your financial health.
Closing a credit line
You will risk your credit score when you wish to close a credit card line because of the hiking in interest
rates. An increase in the debt utilization ratio is also observed when you close cards with a zero balance.
Similarly, when you want to open a new credit card line, the company will check your scores.
Your dishonest treatment towards repayment can hamper your credit score. Short sales, bankruptcies,
foreclosures, write-offs, etc. will leave a negative impact on the scores.
Credit lenders refer to your score, which is the foundation for determining how risky you are for lending
money. With a bad credit image, lenders will either deny you any kind of monetary aid or charge you high
So, keep a close watch on your credit score to make sure that everything is accurate. The advantage of a
free credit score quarterly can be taken. But checking your score more often is more recommended than
doing it quarterly.