After the recent Equifax hacking incident, millions of people are beginning to focus more on their credit score. Personal information was stolen during the hack, with credit card numbers and license numbers included. This information can be used by others to their gain which can lead to poor credit score ratings for you, the unknowing consumer. With this hack, many people are figuring out they want to be more in control of their finances. Learning more about your credit score, including what factors are included in determining your score, will help you be more in control financially. Read on to find out the main factors that contribute to a quality score.
Understanding a Credit Score
A credit score is essentially a number associated to your financial history when it comes to responsible credit management. Scores can range from 300 to 850, with the higher the score, the better off you are. You need a good credit score in order to qualify for a mortgage, car loan, personal loan or credit card. Lenders will be more likely to provide you with financing if your credit score is 750 or above. Credit agencies like TransUnion, Experian and Equifax, will compile credit scores based on the information you have within your credit file. There are certain elements that work to create this score, as listed below.
This category counts 35% towards your overall credit score. This is an important component as it shows how you can be trusted to repay money that is provided for you via loan or credit. Factors that are considered in this category include if bills were paid on time, if you paid late and how many accounts went to collections. Paying bills late and going to collections can decrease the overall credit score you have.
Amount You Owe
A second factor, that counts 30% towards your score, is the amount you owe in credit and loan debt. How much total available credit you have used is reviewed as well as how much you owe on specific accounts such as an automobile loan or a mortgage. The total amount owed from all accounts as well as how much you owe when compared to the original amount is also reviewed. Overall, you want to owe less so it shows that are paying your bills and not racking up continual debt.
Credit History Length
Another factor considered is the length of time you have had credit. This accounts for 15% of your score. How many years have you been using a credit account? What is the age of your oldest account and the average age of your accounts combined? When you have accounts for many years that remain in good standing, it helps your overall credit score.
This category counts just 10% and consists of the new accounts you have. The new accounts you have opened recently are reviewed as well as when the latest account was opened.
Overall, it is important to know your credit score so you or your business can stay in good standing. Having quality resources like Emioptions.co.uk by your side will assist in staying in good standing with creditors.