If you feel like only those with an advanced degree can understand what affects one’s credit score, you’d be happy to know that it’s not the case.
A credit score is a number that helps lenders determine whether you are likely to repay debt or not, and that can affect your application for mortgages or personal loans in Memphis, TN, and other areas. Your score might be 300 or 850, but multiple factors actually go into that score. Here are the things that can affect your credit score:
Your Payment History
Since your payment history accounts for 35% of your credit score, it is the most crucial factor to consider when improving your credit. Your credit score will increase if you pay all your bills on time each month and don’t miss any payments.
If you pay just the minimum payment each month, you will end up paying more in interest. This can negatively affect your credit score. If you no longer use the account, you should still make sure that the payments are made on time.
Your entire payment history accounts for 35% of your credit score.
Your Outstanding Debt
Having a lot of outstanding debt has a negative effect on your credit score. To improve your credit, you want to decrease your debt as much as possible.
It is a good idea to pay off multiple credit accounts instead of paying off a large debt with a small payment.
Also, be sure to keep your debt to credit ratio lower than 30%.
Your Credit History
As your credit history accounts for 15% of your credit score, it is another major factor to consider. The length of your credit history is important to your score. The longer the credit history, the better.
You should make sure that your oldest credit accounts are active and still in good standing.
Your Credit Mix
Your credit mix accounts for 10% of your overall credit score. Generally speaking, having a varied credit portfolio is beneficial to your credit score.
Having a varied credit portfolio is beneficial to your credit score.
If you have multiple credit cards, car loans, and other types of loans, you will benefit from a higher credit mix score.
As public records account for 10% of your credit score, information about court cases or other legal issues can harm your credit score.
By keeping a positive credit history, you won’t have any issues with public records.
How Long You’ve Had Credit
Another critical factor is how long you’ve had credit. As this accounts for 10% of your credit score, it is essential to maintain a good credit history.
If you’ve had credit for an extended period (15 years or more), your credit history will be better.
New credit, or how you handle new credit, accounts for 10% of your credit score. When you are applying for credit for the first time, be sure to take steps to improve your credit score.
If you are getting a new credit card, pay off your balance each month and charge less than 30% of your card limit.
If you are getting a mortgage or other loans, make sure you understand the terms and are prepared to follow through. You should never take out a loan that you cannot pay back.
So there you have it, the things that affect your credit score. In a nutshell, the absolute best way to improve your credit score is paying on time, keeping your credit card limit low, and maintaining a healthy mixture of credit accounts. By doing these, you can have a good credit score and better chances of getting approved for personal loans in Memphis, TN.
If you have more questions about how credit scores affect your loan application or when you’re ready to apply for, personal loans in Memphis, TN, Magnolia Finance Co. is here to help you. Contact us today for a same-day loan!