5 Major Factors Which Affect Your Credit Score?

Life is very uncertain, you do not know you cannot predict what will happen in the future. If you face an emergency situation and do not have adequate savings to face the situation then taking money on credit would be the only option left to you. When you file a loan application in the bank the first thing they would check is your credit score. If it is good your application would be approved immediately but if your credit score is low. Bank authorities would reject it or put it on hold for further investigation.

Factors which impact your credit score

A credit score is not made up of a single factor; various factors impact your credit score. Any positive or negative change in these factors would have a direct impact on your credit score. Some major factors are listed below:

Repayment history

This refers to the regulation of a borrower to repay their loan installments and other pending dues. If you pay your loans on or before the due date then your credit score will improve automatically. Late repayment or skipping your EMIs for a long time can affect your score badly.

Credit Utilization limit

It refers to the ratio between your credit limit and the utilization pattern. Sometimes your expenses exceed your credit utilization limit this can be a sign of bad spending habits and can adversely impact your credit score. Make sure to maintain consistency in your credit utilization limit.

Length of your credit history

Banks usually record a detailed report of your credit history. The history starts from the date when you availed the loan for the first time. If you have a long and positive history then it will definitely add to your credit score.

Credit mix

It refers to the types of loans you have obtained in the past . Whether they are short-term loans or long term loans Also it includes the nature of loans such as home loans, car loans, and other types of loans. It is very important to have a diversified credit mix. Also having a Credit profile number affects your score.

Past credit inquiries

When you apply for a new loan at the bank the bank authorities check the past credit inquiries done by you. They would check how many times you have applied for the loan and the weather you faced rejection and what was the reason for the rejection.

Summing Up

The above-stated factors are some major actors which have a direct impact on your credit score. Any small change in these factors will increase or decrease your credit score. Make sure to get your credit report prepared by an expert and mention all the credit-related transactions done by you.

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