Have you ever wondered what are the factors that may affect your credit score? As most people are always worried about their credit score that even think that one’s need a formal education to figure out what is affecting their credit score? But, in reality, it’s much easier to know the factors.
If you want to know what is affecting your credit score, you only need to consider few things. Apart from all these, lenders and financial institutions will also check your credit score to determine how likely you can repay your debt. Hence the credit score can be a decisive factor in deciding whether or not you will receive a new loan.
What is a Credit Score?
Credit scores are three-digit numbers that show how creditworthy you are, and your ability to pay back the debts. Usually, these numbers range between 300 and 900. This range are based on various things, such as your pending loans, your credit cards, your loan repayment history, and the amount of debt you have.
Hence, If you want to get a personal loan quickly, you need to have a good credit score. Therefore, you can even improve your credit score over time by knowing what factors and types of accounts affect it by knowing that you can change your financial situation. To help you better understand credit scores and the factors that may affect them, we’ve made a comprehensive guide that will explain everything you need to know.
What are the Features Of a Credit Score?
- A credit score is a three-digit number that ranges from 300 to 900.
- Your CIBIL score comprises repayment history, credit exposure, credit type and duration.
- The Credit score of 750+ is known as a good credit score.
- The credit score plays an essential role in the decision of lenders and financial institutions for granting a loan.
- You must never close your credit card account even if you have paid all the payments because your credit card account’s long history can help you grow your credit score.
How Does a Credit Score Work?
Your credit score is essential for determining your ability to repay. It can have a significant effect on your finances. A credit score of at least 750 is considered good, and a person with that score is likely to obtain a loan quickly. That means they will pay less interest in the long run. However, a borrower will be considered excellent if they have a credit score of 800 or higher.
People with a score less than 650 are considered at risk. Since they don’t have to carry any danger, financial institutions and lenders charge them higher interest rates than usual. Also, they want a co-borrower for people with bad credit scores. However, lenders have a different range of credit scores, based on which they grant a loan and set the interest rate.
A credit score might also affect the amount of an initial deposit required for a smartphone, cable service, or utilities or for renting an apartment. Borrowers’ scores are frequently evaluated by lenders, especially when determining whether an interest rate or credit limit on a loan will be changed.
If you want to have a secured credit of lines, then you should check your credit score on Buddy Score so that you can better understand your current credit position.
What are the Significant Factors that can Affect your Credit Score?
Let’s have a glance at the factors that can affect your credit score badly:
If you Have an Irresponsible Payment Habit
Your payment history can impact your credit score a lot. Hence you must try to make all your payments on time. Any late payments or defaults on the credit card will negatively impact your credit score. The longer you take time to make the payments, the harder it will affect your credit score.
If you are the one who has many credit cards, then try to make a reminder for their payments so that even if you forget them, you will be reminded by the alerts and reminders. Hence, you won’t delay in doing your payments or emails.
If you Have a Long Credit History:
If you have a long credit history, then the lender won’t take time to decide on your capacity of repayment and your habit of expenses and payment. A credit score is determined in part by the history of your payments. More than any other factor, paying bills on time has a significant impact on your credit score.
However, If you have severe payment difficulties like charge-offs, collections, bankruptcy, repossession, or foreclosure, this can have a devastating effect on your credit score. It can even make it nearly impossible for you to get approved for a loan. Therefore, maintaining your credit score is best achieved by making your payments on time each month.
If you Make Several Credit Inquiries
When you submit an application that requires a credit check, an inquiry will be placed on your credit report showing you have applied for credit. A credit score is based on the number of questions. While one or two inquiries aren’t going to hurt you much, making several, especially in a short period, will cost you points. Try to keep your applications to a minimum if you maintain a good credit profile.
Fortunately, only inquiries made within the last 12 months affect your credit score. Questions will disappear entirely from your credit report after 24 months. It is essential to know that checking your credit report will result in a “soft” inquiry, not impacting your credit score.
If you Have a Mixed Credit Score
The most appropriate credit mix is a blend of secured and unsecured loans. A fast loan is one where the lender must pledge an asset as security to the borrower. Secured loans include home loans, auto loans, and other types of loans. Unsecured loans are not secured by collateral and are therefore called unsecured loans. Your credit score is impacted positively when you borrow and have different types of credit.
It is essential to obtain a copy of your credit report at least once a year and ensure it is free of errors. You can negotiate better rates on credit in the future if you maintain and build a healthy credit score.
If your CIBIL Reports Have any Errors
If there are any errors in your CIBIL report, it might also affect your credit score. CIBIL report contains the present and records of the credit accounts. Hence, if you find any unexpected errors in your credit report, then you must try to make it correct.
You must also know that any mistake on your CIBIL report will only be corrected by your lenders. There is never an update to the CIBIL report without lenders letting them know the changes needed to be made.
It would help if you had a good credit score to get a loan at a low-interest rate, but you shouldn’t be obsessed with your credit score. Even if you have poor credit, Buddy Loan can provide expert personal loans. They also assist you in your financial problems, and in no time, they will answer all of your questions and help you find the best option for your economic issues.
However, if you manage your credit correctly, your score will increase automatically, which means you don’t have to worry about the loan approval process, and you will be able to live your life to the fullest.
Q. How do I get my credit score to go up?
A. The following are a few steps you need to take to improve your credit score:
- You must build your credit file
- You should not miss your payments
- You must try to catch up on the past-due accounts
- You must pay down the revolving account balances
- It would help if you tried not to apply for new accounts too often
- How much does it cost to check the credit score?
Q. How much does it cost to check the credit score?
A. No, there are no fees or any hidden charges applied to check your credit score.
Q. Where can I get my credit score?
A. You can check your credit score on Buddy Score to know your credit position.
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