Understanding factors that affect credit score is an important step to increase credit score in the future. A credit score will determine whether financial institutions and banks will let you borrow money or not. With a bad credit score, it is not only a business loan that you will have no access too. You can even be rejected when you apply for a car loan, a school loan, a housing loan and even a credit card.
A credit score is the result of your entire credit history. It is calculated by the way you handle your debts and credits. Do you pay them early and regularly? Have you had a lot of bad and late payments? Do you have a lot of credit cards and have big debts in all of them.
If people want to know their credit score, they have to purchase the information via the internet through agencies’ websites.
Here are some of the factors that may affect your credit score.
1. Pay your bills on time
The first factor that affects a credit score is the way you pay your bills. People who pay their bills on time are seen as more responsible, trustworthier, better at financial transactions and are more able to handle their money. Thus, they are good candidates for business loans and credit loans.
2. Credit card handling
The way you handle your credit card and your spending habits will also affect your overall score. People who have maxed their credit cards and have not yet paid their bills will most certainly have low credit scores. This is because people who spend more than they should are not good candidates for a loan because they may just waste the money away.
3. Having credit and a good one
People who have had loans in the past have better chances of getting a higher credit score than people who are just new in the game. However, these people should have also exhibited good credit history; otherwise, they will also have low credit score.
4. Applying for new credits
People who have applied for new credits in a period of time will have a lower credit score than someone who have applied just once. This is because, people who have applied in a lot of banks are seen as desperate for financial support and may be a riskier subject than other people.
Credit score cannot be increased overnight. You need to follow financial discipline.