Your Credit Score – How Your Personal Information Affects it
Many things affect your credit score, and understanding them can help you be aware of how to increase your credit score. In general, a credit score is simply a three-digit numerical value ranging from 300 to 825. Credit scores are typically calculated using data in your credit history, including your outstanding payments; the current amount of debt you owe; and your length of credit history.
The central credit bureau that provided the information on your credit score provides reports to lenders, which are used to calculate your credit score. The credit score is determined based on the information contained in your reports. The information on your reports consists of what are known as “active” accounts. These are accounts that you have opened and have not yet made any payments on. On the other hand, “inactive” accounts are those that are account in good standing and that have been inactive for ninety days or more.
The next thing to know about your credit score is the percentage of total available credit versus your credit utilization rate. Your credit score will be affected by the amount of available credit versus your total credit utilization rate. Your credit score will be affected by the percentage of accounts you use versus the total credit you have available. One example would be having only one open credit card account versus having two. The higher your utilization rate, the lower your credit score will be.
Your credit cards and loans affect what a good credit score is. When you take out these types of loans and credit cards, it can change your ability to make purchases in the future. These credit cards and loans also often have early payment fees, negatively affecting your credit scores. Some consumers have reported that their credit cards have taken their money with no prior notice, and they have not been given a chance to pay it back. These are examples of what is a good credit score.
Many different factors can affect your credit score. Your payment history is one of the main factors. This is the percentage of outstanding debt you have and the total amount still owed to any revolving debt. A high history of on-time payments indicates your credit score will be higher. Having the least one account that is late and is not included in your regular monthly billing cycle will negatively impact your credit score. Your credit score will be calculated as a percentage of the total number of active accounts versus the total amount still owed.
Credit inquiries affect what a good credit score is. Every time you apply for credit, a portion of your application is used to calculate your credit score. Having at least one inquiry within 30 days of applying lowers your credit score. Keep in mind that the inquiry is not considered an actual application. It is just part of the credit process.
The three major credit reporting agencies, Equifax, TransUnion, and Experian, are required by law to provide you with a free credit score from each of them annually. Each of these companies is required by law to provide the information free of charge. They do this by contracting with credit reporting agencies that they know will provide you with a valid credit report that reflects your financial activities accurately. You are entitled to one free credit score per year without any charges. The three credit reporting agencies also will send you a free credit report each year at your request.
Another factor that affects your credit score is your credit utilization ratio. This is the percentage of available credit used by you each month to repay your debts. A low credit score will most often be reflected as a low credit utilization ratio. It is essential to know your credit score and what is used to determine what is a good score and what is a bad score.