credit_scores by shitingting

VIEWS: 2 PAGES: 2

									        Whenever people apply for a loan, credit card, automobile loan, personal loan, or
mortgage, their credit scores are checked. Why are credit scores so important? What
information do they tell credit bureaus? Finally, exactly what factors comprise credit
scores?

        Credit scores are important because they allow credit bureau to make decisions
about whether or not extending credit to individuals is a safe investment. Credit scores
create a highly accurate assessment that tells creditors how likely it is that you will pay
your bills. The higher credit scores are preferable to lower credit scores. Higher credit
scores mean that the individual is more likely to make timely payments on the loan.

        Credit scores are numbers that are the product of a mathematical formula. This
sounds like it is a complicated process, but it is really a very simple process. Credit
scores are determined by several key factors. The typical breakdown of the factors that
determine credits scores are:

                      35% of credit scores are determined by how you pay your bills.
                       This includes the regularity and timeliness of your payments. In
                       other words, do you have an established pattern of paying your
                       bills on time? If not, this will have a significantly negative impact
                       on your credit scores.

                      30% of credit scores are determined by the amount of money you
                       owe versus your amount of available credit. This means that they
                       evaluate the amount of your debt and compare it to the credit that
                       has already been extended to you. Individuals who owe large
                       amounts of money and have little to no available credit will have
                       lower credit scores.

                      15% of credit scores are determined by the length of your credit
                       history. This means that the longer the credit history, the better the
                       credit scores will be. It is important to start accruing credit early
                       and maintaining a clean credit history.

                      10% of credit scores are determined by a mix of credit. The
                       different types of credit an individual has will be evaluated when
                       determining credit scores. Again, individuals who have too much
                       credit extended to them currently will have lower credit scores.

                      10% of credit scores consider new credit applications. Individuals
                       who have recently applied for several lines of credit will have
                       lower credit scores than individuals who have not recently applied
                       for new lines of credit. In other words, if you know you will be
                       applying for a new car loan in the next six months, it is not a good
                       idea to apply for three new store credit cards because this will have
                       a negative impact on credit scores. Forward thinking will help you
                       maintain good credit scores.

       Some of the factors that are not considered when determining credit scores are:
                  Age
                  Sex
                  Race
                  Income
                  Whether you have been turned down for credit in the past
                  Information not contained on your credit report.

        Once all of these factors have been considered and applied to the formula,
accurate credit scores are available both for individuals and credit agencies. However, it
is recommended that individuals check their credits scores at least once a year. It is free
for individuals to pull their credit report to makes sure that the information contained in
their credit report is accurate. Credit scores can sometimes be incorrect, and if you are
not habitually checking your credit report every year, mistakes can have a negative
impact on credit scores.

        It is important to understand all of the factors that impact credit scores, especially
if you plan on applying for credit in the near future. In order to maintain good credit
scores, it is advised to plan ahead for major purchases, consider the key factors used to
determine credit scores, and make an annual habit of checking your credit report. If you
find errors before applying for credit, you will enter into negotiations with higher credit
scores.

								
To top