A prime reason why so many people are dealing with the issue of low or bad credit score is the lack of awareness. Many people are completely unaware of what their credit score is until they are told by a lender that they cannot qualify for a mortgage due to bad credit score. Being aware of what credit score is and how it is determined can eliminate the stress and help you to achieve your financial goals by maintaining a good score.
Credits score is a number of three digits illustrating your financial history and offering lenders an insight of your credit management ability. Credit scores generally fall between the ranges of 600 to 750, where 700 is considered to show satisfactory credit management.
Factors considered for determining your credit score include:
Payment history - How regularly the payments have been made previously. Making monthly payments in time is considered favorable for you. Lenders usually look for signs of any bankruptcy or late payments.
Amount of debt - How close is the amount owed by you to your credit limit. It should not be more than 15%. Higher the amount of debt, lower the credit score.
Length of credit history - What is the length of credit history, as short history can affect your score negatively. Ideally you should keep your accounts for long time to show good credit management.
Total credit applications - How many times you have applied for credit in recent times. Applying for new accounts can have a negative impact on your score, as it shows your tendency to take more debt or you are dealing with some financial trouble.
Credit mix - how many types of accounts you have. Having different types of accounts can be in your favor as it shows your ability to manage various credit accounts. However, having too many accounts can also go against you.
Credit score is easy to improve and manage provided you are aware of what it includes and which are the different factors taken into consideration by lenders for assigning you a credit score. If you are unable to repair the credit score on your own, then taking professional assistance of a well recognized financial expert can prove helpful.