You should know that the better your credit score is, then it will be easier to obtain car finance, loans & credit cards. A lot of credit seekers do not know how a credit score is calculated. There are actually five separate things that make up your score.

Do you pay on time? Consider this section to be the most important for your credit score. Your payment history makes up a full 35% of your score. This information is on your credit report. Beware that lenders will have access to your payment history whenever you apply for finance. To keep your score higher, always pay your payments a few days early. Lenders will frown on late payers, and may report you even if you’re only late by a few days. This will definitely for sure reduce your credit rating considerably.

Got Much Debt? What is referred to by the credit industry as debt ratio makes up 30% of your score. This is described by the debt you owe versus your credit limit. For example we could be in possession of a credit card with a spending limit of $500 and you owe $480 this is a very high debt ratio and possibly have a negative affect.

Definitely if one can reduce their credit card debt to less than 50%, this will positively influence your credit score. Credit bureaus will not differentiate between payers who pay their whole balance or payers who keep their balance below the 50% mark.

Been Using Credit For Years? The longer your credit has been in good standing, the better. A long good credit history is almost always needed to be accepted for financing. This part makes up 15% of your total.

Many people make the mistake of closing accounts that they no longer use. If you have a credit card that you have had for over five years, keep the account alive. You don't have to use it, but this will extend the length of your credit history and that will help get your score up.

What Type of Debt do you have? Whatever type your debt is, this will be responsible for 10% of your total credit score. The three types that lenders look at are instalment loans, revolving credit, and consumer financing. The reason creditors score the difference is because bank loans and consumer financing have set monthly payments.

If your revolving credit makes up most of your credit report, this will look bad on your report. This is because lenders know that the monthly minimums will vary every month depending on how much you chose to spend.

Have You Recently Tried To Get More Credit? The high credit scorers have one thing in common, they apply for credit only a few times. This is responsible for 10% of your credit report. Be responsible when applying for credit, as this stays on your credit file for two years. If are getting ready to financing something, limit your credit checks as much as possible.

People shopping around looking for a big purchase like a car, can fall into this trap. If you have gone to a few different car dealers while shopping for a vehicle and let them run a credit check report at each one to see if you’re credit worthy, you have now greatly reduced you score. Don’t let any creditors run a credit report until your ready to purchase.

As you can see this is how your credit score is calculated. Hopefully, a few of these tips will help you raise your score. Your credit score total can be between 300 and 850. Obviously the higher the better for your credit rating.