You should know what your Credit Score is before they apply for a loan or any fresh credit in order to build your Score and better your chances for approval. Improving Credit Score helps one get loans at much better rates from lenders. A good Score also helps you get access to offers from multiple lenders – giving you better choice. If you don‘t have a good Credit Score yet, consider taking time to build your Credit Score before applying for any new credit accounts.
Bureaus compute your score based on data shared by lenders. Your Credit score is derived from your Credit Report which is built based on your Credit history. Your credit/borrowing history is shared by lenders with bureaus.
Provided below is a list of factors which impact your credit score. Understanding these factors will help you improve and manage your credit health and therefore your credit score.
What it means?
Payment History : Your past defaults on your loans and credit cards will impact your FICO score. More the defaults lower is your score. No defaults leads to a good score.
Credit Limit Utilization: Refers to the draw down on the amount sanctioned. Especially in credit cards, in case your utilization on your credit limit is more than 75%, it lowers your score.
Length of Credit History: It is important to have at least 12-24 months of payment history. The longer the availability of prompt repayment information, the better your score tends to be.
Intensity of Recent Searches: This is a tricky one. The more you shop around for loans or credit cards, your score gets impacted. So unless you are sure you want a loan, don’t apply for one.
Kinds of Credit: This is a measure on the mix of secured and unsecured credit you have. The more variety of loans with prompt payment, the better is your score.