Factors that Affect Your Credit Rating

How do you restructure your finances, and end up with the best credit rating you can? Or, how can you improve your credit rating, if you are having difficulty with your finances now?

So here are tips on how to successfully manage to get a higher credit score:

Paying your monthly bills as they fall due

It’s not hard to figure out that if you make timely payments, your credit rating would look good. Delayed payments work vice versa. Your credit report shows history of payments made, including late payments, charge offs, tax defaults, collections, and so forth. If your payment history reflects negative information, it will punish your scores. So, if it took you a month to settle your dues, the same would reflect on your credit report. The credit agency considers the frequency of delay in monthly repayments,

The late payment record may stay on your credit report for several years, unless you fix it. But, your credit history only represents almost 35% of your overall credit rating. Regardless of your history, late payment alone cannot drastically lower your credit rating. That brings us to the next determining factor, amount of debt.

Outstanding financial obligations

The amount you owe impacts your credit rating.  Almost 30% of your credit score is dependent on your outstanding debts. You may ask, “If I pay off my $1000 credit card debt will be credit score improve?”. The answer depends on the utilization rate. Even you pay off your biggest loan, if you maxed out your credit cards or you exceeded your card balances, it would do little to improve your rating.

Credit utilization pertains to the proportion of balances to the credit limits on your credit card accounts. For example, you have a credit utilization rate of 10% if you don’t use up to other 90% of your credit limit. So, even if you have several credit cards but you keep your utilization rate to 10%, you will do well in this category.

Another thing to consider is the amount of your loan balance. That means, if you haven’t paid the principal amount or you have only repaid a small portion of it, your credit score shall suffer. Even if you maintain a low debt-to-income ratio, if you are carrying more debts than you can actually pay off, it will seriously hurt your credit rating.

Credit History

Do you have a lengthy history of handling your credit obligations? The age of your credit history pertains to the date you actually opened your oldest account. You will earn more points if your credit report is a little bit older. So, it also helps if you keep old and good accounts on your credit reports.

Other factors

If you sporadically apply for credit, the lenders would request for your credit reports/score. The said request is called, “Inquiry”. Credit-scoring agencies also consider the credit mix, or the diversity of your credit accounts. But, you have to balance it. Even if a mix of credit cards and loans may improve your credit rating, having too many outstanding debts and credit cards hurt your credit rating.

If you want to improve your credit rating, contact us. Clean Credit offers a no-obligation assessment fee and 100% removal fee money back guarantee!