Factors That Affect Your Credit Score
At some point, everyone's likely to make a credit purchase or apply for a loan or credit card. Having a good credit score is crucial in making that happen. Many factors affect our credit rating, and for us to make successful credit transactions, we should be mindful of them. There's one transaction that's vital to everyone and that's applying for a mortgage loan.
Having a low rating could very well jeopardize your chances of purchasing your dream home. The solution would be to avoid this scenario at all costs.
What are the factors that could affect your score? Have a look at the following.
Conduct of Your Accounts
Too Many Accounts
If you've too many accounts it could affect your creditworthiness. When you apply for a loan, an inquiry is made to determine your score and whether your application should be approved or not. If there are too many inquiries made on your name, your score could decrease.
Having too many accounts could also flag you as a risk.
Credit Utilization
Keeping your credit utilization low is vital. The way to do this is by not making use of the full credit limit given to you.
Payment History
Your history of payments is a huge factor influencing your rating. You'll be rated on whether your payments were made on time and regularly. Consistent late payments won't benefit you and neither will non-payments.
For any queries on accounts, investigate it as soon as possible to prevent non-payments and arrears. If you've tax problems, get started by seeking legal advice to avoid further action. Any judgments or foreclosure will also negatively affect your score.
Mix of Credit
Another factor that's taken into consideration is how well you can manage a variety of accounts. So although many accounts aren't encouraged, a mix of them is beneficial. The different types include store accounts, mortgage loans, and installment loans.
Effect of a Bad Score
The following items will be negatively impacted by not having an acceptable rating:
Unsuccessful rental applications. Landlords also tend to check their new tenants' credit to ensure they'll be able to pay their monthly rent. Sometimes the property owner will allow someone to cosign for you or request you to pay a bigger deposit.
Makes it harder to qualify for a loan. If you do, your interest rate might be much higher.
Higher insurance premiums. Most companies consult your creditworthiness before giving you a policy and might allocate a high premium.
Deposit required for utility accounts. This is done as a form of security in case you fail to make your monthly payments.
A cell phone provider might even decline your application for a contract and refer you to a prepaid plan instead.
Job applications for financial positions are denied as credit checks are done for security reasons. They need to ensure that their employees are trustworthy when it comes to their finances.
Take Away
Having and maintaining good creditworthiness is crucial in contributing to a positive financial existence. Making regular and timely payments on accounts, not having too many of them but keeping a variety, are all factors that can help you reach this goal.
Not adhering to this behavior can result in foreclosures and judgments, affecting various areas of your life like applying for rental accommodation or your insurance premiums. So be wise and remain credit smart.
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