What Factors Are Used To Determine Your Credit Score

There are a significant number of people that are affected by a less than perfect credit score; this may cause severe problems when applying for finance at cheap interest rates. Not only does a poor credit rating have a bearing on your ability to get approved for credit it can also have an impact on your ability to get a job in some instances. Because of this it is sensible to do whatever you can to increase your credit score by any means possible. So how do I go about doing that I hear you enquire? Before you can repair something it is best to know what is wrong!

Your credit score is determined by numerous different elements some of which are more important than others; I have highlighted them below in order of importance, with the most important factors at the top of the list.

Make payments on time.

This is of major importance and makes up around one third of your total score. Because of this it is of the utmost importance to ensure you repay at least the minimum amount to your debts by the due date every month. The same goes for any other loans and or finance that you may have. Obviously this also applies to your mortgage, always make sure you avoid making late payments to all of the above. It is also worth noting that the more repayments that show on your credit record the better it will be. So if you were thinking of cancelling a credit card or two, you would definately be in a better position if you used the cards to pay all your normal monthly expenses and repay them in total at the end of each month.

Keep below your credit limit.

The next 30% of your score is determined by the size of the gap between your credit facility agreed and the amount that you owe. The more of your allowable credit that remains unspent the better it will look to the lenders. As a rule of thumb you are recommended not to use more than 50% of your credit limit on all of your credit cards.

Show consistent payments for as long as you can.

The next most critical facet when looking to improve your credit score is to maintain regular repayments for as long as you can. As implied above you would be better placed to keep credit cards going rather than cancelling them, as the length of your credit record accounts for a further 15% of your overall score. If you would rather stop using the cards just cut them up rather than stopping the account as that will go a long way towards increasing your score rather than putting a total stop to them. On the other hand if you are incurring a monthly fee just for the benefit of keeping the account active you would probably be more sensible cancelling and taking out a new one with no monthly fees.

Take advantage of a variety of different types of finance.

The last 20% of your credit score is distributed evenly between any new accounts and applications for credit and also the sort of credit that you own. If you have too many new accounts that you are applying for at the same time or too many new applications for finance this can have an impact on your score. While having a wide variety of different types of credit will help to boost it.

This is why it is advisable to take out poor credit loans and maintain regular repayments on it to help improve your credit score, if your score is not as good as it could be. If you own your own home you will probably be well advised using secured home loans as you have more chance of being accepted.

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