Credit Score is very important for financial health. Persons with great scores are chased by companies for funds, while those with medium or low scores will find it hard to finance their projects. There are five critical factors that affect your credit score. They are
- History of payments – This is the most important factor for credit score. It applies to all bills payments history. It is a factor that measures how well you repay the money lent.It also considers (A) How late the payments were? (B) Have your name gone to collections? (C) Did you file bankruptcy? The impact factor is 35%.
- Used Credit – This is the second most important factor in credit score. You should not use up all credit available or not use it at all. Extremes give bad score. The best option is to use some credit and pay on time. The impact factor is 30%.
- Number of years of Credit – The longer the credit history the better it is. If it does not have any negative things like no-payments. The impact factor is 15%.
- New Credit – How many new loans have you taken? You should take one loan at a time to be in the good list. The impact factor is 10%.
- Credit Mix – Taking only one type of credit affects your credit score negatively. So while taking loans do not take two loans of the same kind.