As you may already know, the higher the credit score, the better chances you have of getting a loan. Everything above 622 and up to 1200 is considered a good score, so check it once a year and strive to improve it.
Credit scores are not set in stone, and they continually change according to your loans, payments, consolidation choices, and new information about your financial status.
Once the current data is modified, the credit history, risk profile and your credit score can go up or down, depending on the case.
A recalculation of your credit score will keep the lender up to speed with your changes regarding your finances.
What Improves Your Credit Score?
- The Type of Loan
A home loan, for example, is a common one and can highly improve your credit score. Basically, it shows that you are financially stable to subscribe to a 30-year long commitment and pay the loan back throughout that period.
- Credit Usage and Limit
Sticking up to a 30% credit usage is advised, even though it would be best to spend only 10-20% of your loan. Anything more than 30% will raise question marks from lenders.
No matter the loan, paying it back on time shows that you are a reliable person and that you haven’t taken more than you can repay. Regular monthly payments will boost your credit score and make you eligible for taking new loans.
- The Account’s Active Period
People sometimes tend to open an account when they apply for a loan and close it as soon as they finish making the payments. However, this might lower your score. Having some history with a financial institution proves that you are a worthy client to keep. So, it’s always better when your account has a longer history.
What Brings Your Credit Score Down?
- Numerous Loan Applications
Applying to every financial institution for a loan and getting denied will not look good on your records. This will only make the lenders even more sceptic about giving you a loan, so try to apply only to those institutions that you feel confident about.
- Payment Defaults
Usually, the loan you receive is calculated according to your income and financial resources. By not being able to make regular payments or skipping them altogether, you’ll lower your credit score.
- Court Judgements and Bankruptcies
Unfortunately, these two will be listed in your history for up to 5 years and will minimise your chances of getting another loan. If your credit score situation is bad, try asking a friend or a family member to add you as a credit card holder. This way, you’ll “steal good credit” by association. It’s an option that mustn’t be overlooked.
Changing credit scores isn’t necessarily a good or bad thing, but a direct consequence of your current situation. Bankruptcy, a credit infringement or a court judgement can bring the score way down, while regular monthly payments and fewer loans will improve your credit score.