So What Affects Your Credit Rating

Category: Finance, Credit.

Almost everyone of eligible age has a credit card.

Ever so often it becomes necessary to transfer our balances to new credit cards so we can take advantage of lower interest rates. We are becoming more and more attached to plastic and use it for most transactions. Most lenders offer attractive rates but it is often only those with the best credit ratings who qualify and enjoy these benefits. The higher your score, the better interest rates you are be able to attract. Your three digit credit score is generated when the credit bureau applies a mathematical algorithm using information held about you. So what affects your credit rating? This is very important in influencing their decision to grant you new or additional credit.

Payment profile: Lenders are interested in whether or not you can pay your bills on time or if at all. Bad payment profiles result in a lower credit rating. This indicates to the lender that you are living off borrowed money. Maxing out your credit card: If you have many credit cards that are all maxed out or very near to your limit, this would adversely affect your credit score. Ideally your balance on your credit card should not be more than 25% of your limit. When a potential lender looks at your history they would be very cautious about lending to you as they would see you as a potential risk.

Bankruptcy: If you filed for bankruptcy this would stay on your credit report for a period of 10 years. There are institutions available to help you rebuild your credit rating if you are bankrupt, but your credit history would still be negatively affected. It shows lenders that your debt management is so bad that creditors had to use your home as security for the promise that you would repay your debts. Liens: Such information lowers your credit score and stays on your credit profile for seven years. Credit period: The longer you have been building credit, the more of a picture the lender would have of how well you manage your finances. Multiple searches: If you apply for credit from various lenders, each time a footprint would be left on your report even if your application was not successful.

Providing you have a good payment history, chances are you would score higher in this category. A high number of searches would indicate to lenders that you are unable to meet your commitments without applying and obtaining additional debt. To keep your credit rating up, practice proper debt management. This also would negatively affect your credit score. Spend only what you can afford and always pay your bills on time. If you realise that you would not be able to effectively manage all your debts, seek advice from specialist firms as they would have the knowledge and expertise to help you and may prevent many unfavourable outcomes such as filing for bankruptcy.

Read more...

Similar To Chapter 7 Bankruptcy, Certain Debts Are Not Discharged In Chapter 13 As Well - Finance and Credit Articles:

Chapter 13 is the chapter under the bankruptcy code which allows a person to repay all or a portion of his or her debt under the protection of the bankruptcy court. Unlike Chapter 7 which is a complete discharge of the debt, Chapter 13 is a reorganization of the debt owed to creditors.

Credit Card Companies And Banks, Through The United States Are Looking To Get Your Business - Finance and Credit Articles:

Credit card companies and banks, through the United States are looking to get your business.

The Best No Annual Fee Credit Cards - Tasha Waycaster about Finance and Credit:

The majority of banks now offer no annual fee credit cards to lure in potential customers.