We understand how important it is to have a good credit score. It can influence the lending institution’s decision to issue the loan. But what are the important elements that you must be aware of to maintain a good credit score. Let us take a look at it.
- Debt ratio: It is one factor that will be looked into detail. If you are already under some kind of debt, then it will be analysed and the bank will try to understand your financial health and whether you will be able to churn out regular repayments. Huge credit card balances and numerous accounts with too many open payments can cause harm to your credit score.
- Old records: This factor covers your payment history to the bits. If you are a prompt payer who does not miss a payment it simply means that you will earn reward points which will by default increase your credit score.
- Credit card duration: What matters is here is for how long have you been holding the credit cards and how efficiently have you been coping up with the repayments. If the payment history constitutes 35% of the credit score then credit card duration contributes to another 15%.
- Knowing all your credits: Understanding the mix of your credits gives an insight of your status. Having a diversified credit profile will lead to a high credit score. In fact it is interesting to learn that only one account or one form of credit score can actually bring down your rating.
- New accounts: The credit institution will also keep a track of how frequently you apply for a credit card or any source of credit. A high frequency can hurt your score and applying one with sensible time gaps can help you retain the score.