5 Factors that May Affect your Credit Score
Monday, January 7th, 2008There are many different factors that can make your credit score go up or down. For example, a tax lein imposed upon your home by a court of law can negatively impact your credit score. However, that’s obviously not something that applies to a large number of people who are interested in getting a loan. The average consumer typically has five factors which affect their credit score.
One of the most important factors is whether or not your credit history shows that you make on-time payments. People who regularly make late payments will have a lower credit score than people with otherwise comparable credit histories who make their payments on time. The more recently you’ve had late payments, the lower your credit score. One of the fastest ways to improve bad credit is to start making payments on time.
Of course, you might not have any late payments on your credit history because you don’t have a credit history. The length of time that you’ve been establishing credit is another factor that impacts your credit score. No credit is essentially considered bad credit. Many experts recommend that you get a low-limit credit card or even a gas card as soon as you’re old enough to start establishing credit.
Another thing that matters when looking at your credit score is how much debt you’ve already accumulated. If you owe a lot of money to a lot of different people, chances are lower that someone else is going to want to give you a loan. People with only a little bit of outstanding debt generally have higer credit scores than people who owe a lot of money.
This rule isn’t tried-and-true however because another factor is what types of debt you have. There are some kinds of debt, like mortgages, which are generally considered positive. There are other types of debt which can negatively impact your credit score. You may find that your credit score differs if you have credit that you pay in installments (such as monthly auto payments) as opposed to revolving credit which you pay as you can (such as paying off the balances on credit cards).
Finally, your general credit activity in the time period surrounding your application for a loan can affect your credit score. For example, if you apply for twenty different credit cards in the span of one month, you’re throwing up a red flag to lenders that you’re desperate for some money. This can lower your credit score. Even applications that are approved can negatively impact your score if there is too much activity happening at one time.
