On your Credit Score Credit File Affect Credit Score Payments Adds up your Credit Score

Many people hear that they do have to maintain a good credit score, but unfortunately the long document once you got it in hand is not going to tell you much unless you can understand what things mean on your credit report and how your credit score builds up. There is no point guessing, here is a quick guide on how to obtain information on your credit score.

Why are credit scores important?

A credit score is a measure for credit providers to decide if you are credit worthy or not. The higher your credit score is the more likely you are to maintain your credit well, however if you have a low credit score you either have no credit history or you were not paying on time on your previous credit. Therefore it is an indication of your overall credit profile for lenders and they tend to make a decision based on your score. They set up a cut-off score and they accept your application if you are above that score and automatically decline it if you are below. Obviously they do not make every decision based on plainly your credit score, other aspects are taken into consideration as well.

What makes up your credit score?

Your credit score is made up by your credit history, and you can get positive and negative votes based on your repayments. Every repayment builds up your credit rating, however every default note or late payment damages it. However payments only make up about 35% of your credit score. The total amount of your outstanding credit makes up another 30%. The length of your credit history also contributes towards your credit score with 15%. The type of credit you are using and new applications still have a 10% share.

How payments affect your credit score

Every payment on time increases your credit score, however depending on how long you were late with the payments, missed or late repayments can damage it even more. When calculating credit scores the Credit Bureau takes into consideration the length and severance of past due payments. But the worst enemy of your credit rating really is public records, like bankruptcy, judgments and suits.

How to understand your credit rating?

You firstly need to look through your credit summary. Check that all the accounts and account types are correct there. It tells you how many open accounts you have, including revolving credit (credit cards), installment accounts (loans), mortgages and collection accounts. It will also tell you if any of those accounts are or were in the past delinquent. It also shows if you have any public records. Next you have to look through every single account and read the account summary. It tells you about any missed or late payments and joint parties you might have on the account. Look for information that may affect your credit score and try to repair those items to better your credit score.

How to identify the weak points of your credit file

There are many places you are able to repair your credit score, you just have to carefully look through your credit file. First you need to eliminate the accounts that are open on your account but are no longer using. If you have paid off an account but it does not show you can ask the creditor to update this information. You also have to find the accounts you have defaulted on and make sure you bring those payments up to date. If you have moved address recently make sure it is updated on your file and you don’t have credit registered at plenty of different addresses.

The very first thing you have to do when you are trying to organize your finances is to read and analyze your credit file. By understanding your credit score you will be able to better your rating and your financial situation as well.