Your credit score is a big determining factor when it comes to taking out a loan. There are so many different things that affect your credit score, which can leave you in a tricky position when it comes to taking out a loan or line of credit. The good news is, once you understand exactly what affects your credit score, you can make the right changes to your financial habits to improve your score and get yourself in a better position. So, what affects your credit score?
What Affects Your Credit Score?
Have you been asking yourself, what affects your credit score? Unfortunately, it’s not a straightforward answer. There are so many different factors that go into determining your credit score, which can change depending on what credit bureau your credit score is with. If your credit score is a number that’s generally between 0 and 1200.
If you find your number is 500 or below, this is considered a bad credit score. Lenders will be less likely to take a chance on you when it comes to approving a loan. On the other hand, if you have a high credit score, it is much easier to gain approval for a loan with the lender of your choice.
What affects your credit score?
- Missing repayments: if you miss loan repayments or are even late in making them, it can have a negative impact on your credit score. According to Experian’s 2019 Know Your Score report, your credit score can drop by 22% if you miss just one credit card repayment. If you’re more than 60 days late on a loan that’s more than $150, the default is listed on your credit report and will remain there for five years.
- Too many credit applications: every time you enquire for a new line of credit, this is added to your credit report and stays there for five years.
- Court judgements: having a court judgment listed on your credit report makes you an increased risk to potential lenders. They stay on your file for five years from the date of the judgment. Likewise, if you file for bankruptcy this will affect your credit score for the long term.
- High credit utilisation ratio: if you are using up all of the credit made available to you, this will negatively impact your credit score. It suggests you’re spread too thin and may be unable to keep up with repayments.
- Credit history: a long credit history is a good thing. It shows you have been a reliable borrower for a number of years and makes you less of a risk to a potential lender.
- Credit mix: likewise, utilising a number of different types of credit can also positively affect your credit score. It shows you have a diverse portfolio, and indicates you have a good history with a number of different types of credit.
Looking into what affects your credit score? These are some of the factors that contribute, but there can be many more as well. It’s best to check with your credit bureau for more information.
Of course, sometimes mistakes are made, and a negative listing is popped onto your credit score incorrectly. Let’s take a look at what you can do if this has happened to you.
What Affects Your Credit Score? Now, What Can You Do?
You’ve discovered what affects your credit score, but now, what can you do about it?
You’re able to check your credit score for free once a year, which is a good practice to get into. It allows you to look at any negative listings that have been made against your name, so you can make sure they are all correct.
If you do find an incorrect listing, the best thing you can do is bring in a third party to repair your credit. They can dispute any incorrect listings that appear on your credit score, so you don’t find yourself in a position of having a bad credit score.
Having a bad credit score can affect your future chances of being able to take out a loan or a line of credit, which is why it’s important to keep your credit score as healthy as possible.
Repairing Your Credit
If you do find yourself in a position of bad credit, it always helps to look into credit repair. Finding the help of a third party can ensure your credit report is up to date and correct, giving you the best chance of financial success.
The team at Clean Credit are experts when it comes to fixing credit scores. We can help find any inaccuracies on your credit report and will apply to have them removed on behalf of you. If you’re ready to give your credit score a much-needed boost, get in contact with the friendly team at Clean Credit today.