How Significant Is Credit Report Score  ?


Explaining Credit Report Scores

Credit ranking is largely used by loan providers to decide whether a borrower is creditworthy. This means that your options on credit financing will be limited if your scoring is not very impressive. The highest score is set at 850 while the lowest score is set at 300. There are various factors that can affect your credit standing including:

  1. Payment history

The way you clear your payments contributes to 35% of your score. There are various things that are factored in including cases and frequency of late payments. The bureaus will also take into consideration the time it takes to settle any missed payments. You can maintain a clean payment history by setting up automatic payment reminders to ensure that all expected payments are sorted out in time.

  1. Debt load

You total debt loan accounts for 30% and this is usually done as a comparison between your debts and the maximum offer that you can qualify for. To boost your chances of having a better ranking, you should avoid reaching the maximum limit approved on your credit accounts. It is advisable to keep using old accounts even if they are not very useful instead of canceling them.

  1. Credit period

Your credit duration covers 15% of your credit scoring and you will therefore be boosting your credit ranking by maintaining longer credit periods. There are measures that you can put in place to maximize on credit period including keeping your old credit cards active and avoiding opening unnecessary accounts. You can be using your old accounts for making automatic monthly payments.

There are still other things that are factored in when calculating credit ranking including new accounts requested or opened (10%) and quality of such accounts (10%). Using revolving accounts is considered more effective compared to taking installment packages like auto or home loans. The various categories of credit scores are:

  • Excellent credit- 720 to 850
  • Good credit- 690 to 719
  • Fair credit – 630 to 689
  • Bad credit- 300-629

You can always request for your report at any time but this may attract some small charges. Any inaccurate details should be corrected immediately since a poor score can result from errors made during reporting.

How does credit ranking affect my financing options?

In making lending decisions, a lender can decide to approve or reject your application based on your ranking. However, you will still be eligible for huge offers even with a tarnished credit report but your exact score can contribute to changes in interest rates and even repayment terms. Generally, you will stand to qualify for more financing options and stand to get competitive offers by maintaining an impressive credit score.

There are also loan providers who will ask for collateral when dealwith poor credit borrowers especially when giving out large amounts of cash. This is a move that is made to counter the risks of giving out financing to such high risk individuals. In such cases, the loan providers can also consider income source to confirm affordability.