If you are stuck in a vicious cycle of loan denials and high cost credit, or you simply want to build credit history as a newcomer to the US, you should enroll in Build Credit. Build Credit is meant to raise your credit score, since it does not add to your current credit usage, your credit score will not be negatively impacted.
Behind the number itself (credit scores typically range from 300 to 850), there are five main factors used to calculate credit scores:
- Payment History - 35%
- Amounts Owed - 30%
- Credit History length - 15%
- New Credit - 10%
Payment History and Amounts Owed are the most important factors. Lenders want to be sure you will pay back your debt on-time. When they review a loan application, they will look at your past financial behavior to determine whether you are a financially responsible person. It would raise red flags if they see late payment history on your credit report. Amount Owed, particularly as represented by your credit utilization ratio, is the next most important factor in your credit scores. This ratio looks at how much of your available credit you're utilizing and can give a snapshot of how reliant you are on non-cash funds.
Credit History Length indicates how long you have held credit accounts, which makes up 15% of your credit score. The longer your credit history, the higher your credit scores. New Credit is the number of new credit accounts you have recently opened and the number of hard inquiries lenders make when you apply for a loan. Too many accounts or hard inquiries shows that you are constantly looking for different money sources and your financial risk has increased.
Having a clear understanding of your credit score is important. Know your weakness and start to work on those areas that cause your score to fall.
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