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Many people rely on financing options for major purchases throughout their life, such as for a new home or new car. Your credit score impacts your ability to get funding for a college education or large purchase, but utility companies, landlords and potential employers may also use your credit score to determine your financial character. A low credit score can keep you from getting an apartment or being approved for a personal loan. Here’s what affects your credit score.
How timely you are in paying your debts and bills is the heaviest scoring factor. Missed or late payments on short term loans Mississippi lenders provided puts a negative mark on your credit report that can last for seven years. A negative payment history, even if it was a one-time occurrence, can keep you from getting new credit.
Credit utilization, or how much of your available credit you’ve used, shows lenders how much you can be trusted with your finances. If you have several lines of credit open and your usage on all of them is high, you are a lending risk. Usage rates need to stay below 10% for the most favorable credit scores.
Lenders are looking for credit accounts that have been open for several years but also factor in your newest accounts to get an average age for your credit history. Long histories are more favorable, which is why some financial experts argue for never closing credit cards. Opening new credit and having inquiries made can negatively impact your score.
Your score will be more favorable if you have a mix of credit accounts. Credit cards, student loans, a car loan or mortgage make up a diverse credit portfolio and show your ability to manage credit.
Credit is a hard thing to obtain but easy to destroy. Know what impacts your credit score to guide you in your personal finance decisions.