No matter how old you are or your current financial situation, it is important to understand your credit score. You not only need to know your credit rating at present, but you need to understand the different factors that influence it. This is important for maintaining your credit score and ensuring you don’t do anything that could jeopardise your position. Of course, if your credit score is poor, you will need to know what influences it so that you can work on improving it.
Past Payments
One of the main factors that plays a role when it comes to your credit score is your ability to make payments on-time. This is the most important factor of them all. If you miss a payment, it will show on your credit report for six years. This could prevent you from getting any credit over the next six years, which could be a huge inconvenience. Because of this, it is vital to put measures in place so that you do not forget to make a payment. You could put an alarm on your mobile phone, for example, or you could set up a direct debit so that payments come out of your account automatically each month.
Open Credit
Another factor that is considered is how many credit accounts you have open. If you have a large number of credit cards, you may want to read this guide on how to consolidate credit card debt. By having your debt in one place, rather than being spread across a multitude of accounts, you could boost your score. On the other side of things, if you do not have any credit cards, you will also have a bad rating. This is because you won’t have a credit history at all and, therefore, there will be no information to form the basis of your credit score.
Available Credit
The percentage of available credit you are using also has an impact. If you are using a high percentage of the credit that is available to you, this indicates that you are relying on credit to fund your day-to-day living, and this will have a considerably negative effect on your score. There are two approaches you can adopt in this instance. The first one is to simply pay off some of your credit cards. The second is to get in touch with your credit card providers to find out if they will increase your limit. By doing this, you will be using less of what is available to you overall, and you can improve your score as a consequence.
Other Factors
Finally, some other credit score influencers you need to be aware of are as follows: how many hard searches there have been on your credit report within the last six months, how many credit applications you have made in the last six months, whether your personal details are up to date, whether you are on the electoral roll, and the average age of your credit accounts.
Hopefully, you now have an understanding regarding the different factors that influence your credit score. You can use this information to improve your credit score and/or to maintain it.
