You should regularly ask to see your credit file. You can also get it online every year, in PDF format. Request your credit report, it’s a bit like going to see the doctor to do an audit of annual health and make sure everything is in order.
Your credit report contains own personal information that are related to your relationship with the credit. Such information is statistically analyzed and translated into a credit score. Your score is a numerical value which is from 300 to 900 points. The higher it is, it means that you are solvent with banks and credit institutions. Your score has a direct influence on the credit limit that these institutions will be willing to offer, as well as the interest rate at which the money will be paid. Suffice to say that you want to make sure to keep your credit score as high as possible it’s among the effective ways to build credit.
What is your credit score?
5 factors are used to determine your score; these five factors are not equal and are described below:
The payment history
Account for 35% of your score. This factor indicates whether you have made your payments on time. Late payments of 30, 60, or 90 days or more shall be recorded and will affect your report negatively. This is why we must always pay its debts on time as payments made on time positively affect your score. You pay your bills credit cards completely each month, or only the minimum? Is that you have already been contacted by a collection company? Have you declared bankruptcy in the past 7 years? All these issues have a direct impact on your score.
Account for 30% of your score. This factor analyzes your behavior towards credit limits allocated by your lenders. If you use your credit responsibly, without maximizing your debts, this will affect your credit score positively. If, against using the full capacity of your credit (say you borrowed $ 9.500 on a credit of $ 10,000, it will have a negative impact on your score. Generally it is recommended to use only 50% to 75% of your available credit.
Account for 15% of your score. This factor indicates how long you have credit accounts. If your account is recent, or if you are rebuilding your credit, it will result in a lower score. Instead, if you have your accounts for several years and that you pay regularly, this will inevitably result in a higher score.
New credit and recent credit inquiries
Account for 10% of your score. This factor indicates how many times you are looking for new credit and how you treat recently opened accounts. Every time a lender makes an inquiry on your behalf, it means that you are looking to contract a loan. This is quite acceptable from the point where investigations are reasonable (if you want to finance a car loan for example, it is quite possible that you are shopping several financial institutions before making your choice.) However, if the investigations are made on your behalf are not consistent and extend over several months; it will reflect negatively on your score, in fact, the logical conclusion is that this will be interpreted as a refusal on the part of credit companies to grant you a loan (which would force you to seek credit elsewhere). Or it may mean that you are in debt and looking to find other sources of funding.
Type of credit
Account for 10% of your score. This factor takes into account the type of account you have – car loans, lines of credit, credit card balances. Generally, it’s better to have varied types of accounts, because it shows that you are able to manage your finances.