What Affects My Credit Score?

A credit score can be comparable to a grade given in high school or a designation in an office. The better your grades are, the better are your chances of ending up with a scholarship. Similarly, the better post you are in, the better are the perks you get. With credit score also, you can get lower interest rates by ensuring that you maintain a high credit score. There are certain factors that affect your credit score. It is your responsibility to make sure that you understand these factors and improve upon your credit score. Some of these factors are

  1. Repeated Late Payment of Debts: In the past money lenders operated on trust, this has not changed much today. When a creditor gives you a credit, they expect you to pay your debts on time. If you pay your debts late once or twice, it goes o your report but the damage is under control. This habit when repeated however does not bode well for you or your credit score as you will be a high risk for money.
  1. Misuse of Credit: If you have a history of misuse of credit facility provided by creditors, like maxing out on your credit cards or using a credit line for casual purposes, then your score drops automatically.
  1. The Account’s Age: The formula used to calculate the credit score ratings have an intended bias towards the age of the account. I.e. how old the account is. This is because a person who has been using the account for a long time is more reliable than a newcomer to the credit world. So, the former will have a better score rating compared to the latter.
  1. Card Usage Frequency: This is really important since there are many people who get addicted to shopping and max out on their cards only to apply for more credit within short periods of time. If a person has been with the company for a long time, he or she will be given the credit, but a newcomer will get a lower rating when applying for credit frequently.
  • Credit Type: There are types of credit like one time loan and a secured card which can be availed. Usually, secured cards are risky as they offer the customer a chance to use his credit over and over and will be given a lower rating on their credit score.