Q: I just checked my credit notes, and I wondered how a pointing credit calculated in general
A :? Your credit score is calculated based on information in your credit report. Each credit score provider like - FICO, Vantage and CreditXpert - have their own algorithms and methods for calculating your credit score based on this information. Not only that, but they have different rating scales as well. The good news is, though, that no matter what service you use to get your credit score Equifax, Experian and / or TransUnion, they all use similar factors from your credit report to calculate your score (s) credit. It is important to know these factors so that you can stay on top of your credit and know what actions that affect it.
How is credit score calculated?
The basic general factors that help to calculate your credit score include your payment history, the amount you owe, the length of credit history, amount of new credit and types of credit . Here's a guide to understanding and strengthen each of these credit factors.
Payment History
This shows past credit accounts that you have made payments. Late payments affect your credit score negatively, while paying on time and maintaining a positive salary history will help boost your score. Your credit report will show the minimum monthly payment requirements for each of your accounts, and if you have anything outstanding. This represents a large portion of your credit score because your payment history shows creditors that you are responsible for your accounts or no credit.
Amount Owed
The amount you need is a factor used to calculate your credit score because it depends on the ratio between the amount you have available to you and how much you spent . This ratio is called the credit utilization rate, calculated as such:
The higher your credit use radio, the more it will affect your score, because it shows that you use more than your credit limit. It is good to have a large amount of credit available, but bad to be using much of it.
Length of Credit History
Having a credit history more shows lenders that you're used to having credit accounts, and makes you look more responsible with their credit eyes. As a best practice, if you have old credit cards you no longer use, it is best to keep them open because the credit accounts you have more good standing open, positively will affect your credit score .
New Credit
Just as with credit cards open for a long time is good for your score, opening too many credit accounts in a short period of time is despised among lenders. Opening too many accounts at once represents greater risk for them, especially if you have short credit history. As you can see, all these factors work together and depend on each other to calculate your credit score.
Types of credit
The types of credit you have under your name is used to calculate your credit score because lenders take into account this type of experience you have with loans like a mortgage or a car loan. Although this is not the most important factor in calculating your credit score, it is healthy to have a mixture of different types of credit accounts -. If they are necessary for you
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