Helping Your Credit Score

By Jack H. Sousa

Ever wonder how your credit score is calculated? Well, it's really not all that complicated. In this article, you will learn the five factors that determine your credit score as well as the weight that each of them carries. These five factors are: payment history, overall account balances, credit history, types of credit and inquiries. After reading this article, you won't be able to calculate your score because there are complex algorithms used to compute your credit score; however, if you can understand the underlying factors that contribute to your credit, then you can learn the best strategies for boosting your score upward.

Payment history is reviewed to make sure that you don't have any late payments that are more than 30 days past the due date. If you do, and they're recent ones, then your score will drop. If you keep your payment history on time and pay when bills are due, then the number one category will be a major factor in your final score.The second category, available credit, is based upon a percentage of credit available to you compared to current loan balances. For example, if you have a credit card with a $10,000 credit limit and you have a $3,000 balance, you will be rewarded in your credit score. The algorithms seem to indicate that keeping an approximate balance of one-third of your available credit at all times boosts your score. However, if you approach, or worse go above, your credit limit, your scores will fall.

Maintaining low balances contributes to the second largest factor in your credit score. As a good rule of thumb, it is a good idea to owe approximately 10% of your total credit limits. For instance, if you have a $1,000 line of credit, you should maintain a low balance of $100 on any given month. Owing too much money on accounts shows that you are a risk factor and are unable to pay account balances down. Creditors want to deal with consumers who can show restraint and discipline with credit lines. You want to show creditors that you are responsible and will pay them off in time. You don't want to show that you have a high dependence on credit.

The things that damage your credit score the most are late payments, collections, Bankruptcies, foreclosures, tax liens and judgments. If you have any of these types of credit accounts you will see credit scores in the low 500's and not sufficient to receive a loan from current lenders.It make good sense, if you have a lot of high interest loans, high loan to value credit cards and collections, to refinance your home or take out an equity line and pay off these small loans. This action can raise your FICO score dramatically and make it possible to get approval from a bank for a better loan rate.

There are professional people in the marketplace that specialize in improving your credit scores. It pays to work with these people and get your credit scores raised. Just an increase of one percentage point on your loan of $500,000 can save approximately $20,000 per year.Our credit score can mean the difference between being denied or approved for credit, and a low or high interest rate. A credit rating score can help you qualify for an apartment rental, loan for new home, furniture, new car or even a credit card.Any kind of individual who needs to apply for a major card or financing will have to abide by the rules and regulations required by the creditor. A crucial element for any kind of loan to be authorized is your credit rating score.A FICO score is the determining factor with lenders whether you will be approved for a loan or not. Your existing credit score in addition to your previous credit history is considered in developing a current credit score.

Where Does It Come From? Now you are probably wondering "Where does my credit score come from?" This is a very common question and the answer is simple: Your credit score comes from your credit report.This credit report is created by the three major credit bureaus in the states and it contains the history of your payments, the amount of loans that you have, how much you owe, and a few other things.

Look for support from professionals.Don't be enticed by every attractive offer by lenders. It is better to speak to a specialist prior to accepting an agreement without thoroughly investigating the fine print.Financial experts can assist you in effectively handling your financial resources. They can be your source of help and support on concerns regarding your credit scores. They can probably advise you on the benefits and drawbacks of pulling your own credit report and the many demands lenders require before they arrive at a credit decision.

Do not let your due date slip by.When you pay your bills on time or prior to the due date, you are establishing really good credit score standing. An additional advantage when you are paying in advance is that you are additionally making your balances low.Late payments will certainly not just provide lenders with a bad perception of you but it could contribute to a lower credit rating. To avoid late repayments, it is better to track due dates. Develop a monitoring system for due dates a week or two before your payment is due.

The one and most efficient ways of doing this is to peruse through your credit reports; these are detailed reports of your credit activity over the past year or years depending on the time. Look through it to see what lowered your credit score and work to improve it by not doing such things.Settle any outstanding debts,The report will tell you where you have debts and how much you owe whether credit card payday loans. This information will then help you to reduce these debts by paying them off or at least making arrangements on how to pay them if the debt is not within your ability. The fact that you have started on the payments is an improvement on your credit score.

Important: Having different types of credits can help your score but don't go out and get loans if you don't need them. This isn't a significant part in the credit score formula (it only represents 10% of your credit score) so don't get yourself into more debt just to have a better mix of credit.How Can I Improve My Credit Score? Now that you know what a credit score is and where it comes from, the next thing you have to do is to start improving it as soon as possible. The truth is that it won't be an easy task (especially if you have a low one): it will take some time, money and patience but it will be worth it. A few more points could be the difference between buying the home or car that you and your family deserve or not!

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