Credit Score Factors

Your credit score is one of, if not the, most significant figure in your life financially. It plays a major role in deciding whether or not you'll get approved for a loan, credit card, or any other type of credit. Despite its importance, many people are clueless when it comes to their own score. They have no idea where their credit score currently stands, let alone what could be affecting it. Even with the help of a credit counseling agency, you can't bring your score up if you don't know anything about it, so take a look at some of the primary factors that go into determining your credit score here:

• Do you struggle making your credit card payments on time? Chances are your credit score has long been suffering, as late payments are one of the most common negative factors. One or two over the course of a couple years won't have much of an effect, but 3-4 in the same year will definitely hurt your credit score. Try signing up for the automatic payment programs that most credit card companies offer.
• One of the most important, yet least understood, factors in determining your credit score is your debt to available credit ratio. Generally speaking, the lower your ratio, the better your credit score. Ideally, credit reporting agencies would like to see consumers using less than 25% of their available credit. Although you can still maintain a good score with fairly high balances, improving your ratio will only help increase it.
• Have you ever declared bankruptcy? If so, then you probably already know just how damaging it can be to your credit score. Declaring bankruptcy will cause your score to plummet and you'll find that opening any new lines of credit will be extremely difficult. What's worse, bankruptcies typically stay on your credit report for over five years.
• One factor that doesn't affect your credit score - your employment history, despite the fact that it may appear on your credit report. Although it could very well determine whether or not you're approved for a loan or new line of credit, it is actually illegal for credit bureaus to consider your employment history or current employment status in calculating your credit score.
• It may some trivial to you, but applying for too many lines of credit is usually seen as a bad sign by the credit bureaus. Every time you apply for a new loan or credit card, an inquiry is listed on your credit report. A large number of these indicate to creditors that you are desperate for credit and may be struggling financially.

Possibly the most dangerous factor to your credit score is your identity. An identity theft has the potential to completely ruin your credit score for years to come. If someone manages to steal your identity, there's simply no telling how much credit card debt they could rack up in your name. To make matters worse, you may not even find out about it until the damage is essentially done. To understand more about credit counseling read the glossary we have provided for you to learn from.