In this article we will consider two important factors that affect your credit score.
1. Regular payments on the loan (35%).
Regularity and punctuality of scheduled repayment of the loan – is the most important factor that determines approximately 1 / 3 of the credit score. Banks start from a logical assumption that a person that did not miss payments on the loan for many years will continue to follow the same practice – and thus such a person can be safely lent.
If your credit report has negative marks, they will reduce your score. How much? It depends on how long you missed a payment, how many times such delays occurred, and how difficult it was to get money from you.
One missed payment many years ago will not have a noticeable effect on your score, but if you delayed payments a few times last year – it’s a bad sign for the agency. If you forgot about the date of monthly payment once and one call from a bank employee was enough for you to fulfill your obligations – this will not affect your score. If the bank had to take special measures for tracing, transfer the debt to the collection agency or go to court – a borrower’s credit score will drop very much. Never delay your loan payments.
2. The current total size of the debt (30%).
The second most important factor affecting the credit score – is the size of you current debt. Try to calculate how much money you can borrow – for a car, an apartment, for urgent needs, and so on, and then divide your current debt into this amount: you will get a ratio that indicates how close you are to your “credit ceiling”.
For comparison, the majority of Americans use less than 30% of available loan resources, and only about 12% use more than 80% of possible credits. The closer your total debt to a reasonable maximum, the lenders are less willing to lend money to you.
Resist the temptation to take a favorable credit without pressing need, and try to repay those debts that you can. Always correspond the overall size of your debt to your income.
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