Credit is a tool that opens many financial doors. When you buy a house or a car, buy goods or services, or when you want to get a loan, having good credit is vital. But at the same time, it carries a great responsibility. When you apply for a loan, the responsible trade, company or bank will request your credit report. This shows your score and your credit history. Your credit report is basically a summary of how many accounts you are paying (cards, loans, etc.), how you pay them and how long ago you are paying them.
According to experts, a score of 720 or more is recommended to access the best credit offers. If your score is less than 720, do not be discouraged. There are several ways to replenish your credit and strengthen it so that you have access to capital for your business. In fact, if your score is too low, we recommend that you go to a credit specialist to give you an analysis of your free credit card info and thus begin to restore it.
What makes up your credit score?
Payment history – 35%: reflects if you pay your bills on time, if you have had arrears or if any of your accounts has been classified as loss due to non-payment.
Balances – 30%: the proportion of your outstanding balances compared to the amount of credit you have available.
Age of your credit history – 15%: indicates how long you have been borrowing.
Recent credit requests – 10%: determines how many requests you have processed in recent months.
New credit – 10%: how many types of credit do you have at this time such as the car, the mortgage, the credit cards, etc.?
Keep reading here to have an in-depth analysis of the components that determine a good credit score.
There are several elements at snurl that you must take into account within each of these points to understand well how your financial actions influence your credit report. For example:
Credit history: the way you pay shows creditors your financial responsibility. Payments made on time and payments higher than the minimum required are very positive signals. On the contrary, the arrears, surcharges and collection calls are not good at all.
Level of indebtedness: according to the experts, the balance of your accounts should not exceed 30% of the credit you have available. For example, if your line of credit for a card is $ 10,000, the maximum monthly balance that you should have in it should not exceed $ 3,000. If you are always at the limit and paying only the minimum, it can be interpreted as a reflection of lack of ability to pay, which is not positive.
Antiquity of your credit history: many business owners feel confused and frustrated when they see that although they have few accounts and pay on time, they do not have excellent credit. This is because companies and banking institutions attach great importance to an extensive credit history that demonstrates the long-term consistency and ability to pay.
Recent credit applications: the more credit applications you have, your credit score will decrease. Too many requests can be a reflection that you are short of money, and that is not a good sign for a company or institution that will lend you money, as it questions your ability to pay them in the future.
Credit composition: if only credit card accounts appear on your credit report, you can add variety by asking other creditors to provide your credit information to the credit bureaus. This information can include your student loan, your store credit cards, your credit in furniture stores, etc.
Because of all this, it is very important to restore, maintain and grow your credit. That way you’ll benefit from better interests, and keep financial doors open. But above all, you will save a lot of money.