How Do I Calculate My Credit Score?
To calculate your credit score, you must adopt the measure which most money lenders take while assessing the risks involved while giving loan to a particular customer. The calculation of the credit score is normally made on basis of five factors such as payment history, amount owed, new credit, and period of credit history and the nature of money credit taken.
Study of payment history will reveal how well you have repaid you previous loan or is still repaying them. The factors influencing to calculate credit score considered while studying the payment history is that whether you had declared bankruptcy or if there was any delinquency in your payment history. Study the problems which arose if there was any and whether the problems were serious or not and also how much time it took to resolve the issues. The more problems you have during your repayment history, the less the chances of availing a further loan. This has a retarding effect to raise credit score.
The most important factor governing your credit score is the total outstanding loan amount you owe to the money lenders as on date. Importance is given to the amount of debt outstanding as on date and the number of accounts including their types you hold. This information reflects your current financial status and your credit score is calculated on the basis of your liabilities you have on date. Your effort to raise credit score is affected if you have a large amount of money debt as on the date.
Amount of debt level is an important factor governing your credit score. To calculate credit score you have to take into account the amount of debt you have as compared to your credit limit. This is known as credit utilization and the more your credit utilization; you come close to reaching your credit limit. This has a negative impact on your credit score. Keeping your credit utilization below 30% will help you in your credit score.
The longer your loan credit history, the more the information is revealed about your spending habits as it leaves your account open. This is a factor which influences the money lenders to offer you further credit. Too many credit enquiries by you may cause a negative effect while going to calculate credit score. Money lenders will come to know on inquiry that you are in financial difficulties as you are seeking credit from many sources. Although the inquiry will be for the past two years, your credit score will be calculated on the basis of the last year in which you had made the applications.
To raise credit score improves if you have different accounts which reflect that you have the ability to manage your money in many credit accounts. While calculating your credit score, the following factors do not influence your credit score are how much money you are having in your account and information relating to your personal status.
There are many ways to calculate your credit score but each of them are based on the basic principles of certain mandatory information as discussed herein. Being conscious about the influencing factors, you can keep your credit score high.
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