Everyone knows that good borrowing history is essential if you want to take a loan. It takes into account how many loans and mortgages you have taken. This means that before lending you the money, the companies will examine your score and determine the interest rate to approve your loan application. A higher score will lead to better odds of getting the loan at the best rates.
So, if you are also looking forward to borrowing money or taking a loan from the companies that provide financial aid, here are some factors that can help you maintain and build a good financial score.
- Payment history – Every lender is doubtful about whether they will get their money back or not. That’s fair because nobody wants to lend money to someone who cannot pay them back. That’s where your payment history comes in. It is the foremost factor that has a significant influence on your score. It affects your score by 35%, which is the highest of all the elements. So, you need to build a strong payment history to impress your creditors.
But how can you do that? Paying your bills on time can really help you to build a good financial history. For this, you can set a reminder on your mobile with the due amount.
But hang on! What if you are not able to pay your balance amount on time? Don’t worry! You can pay the minimum amount and then break the payments into installments. However, financial experts advise paying the full amount as it reduces the financial burden.
Remember, putting off the bill payments will definitely make things worse. So don’t! Otherwise, your financial report will be full of those nasty red marks if it contains any debt settlements, lawsuits, bankruptcies, or foreclosures against you.
The frequency of unpaid or missed payment will have a negative impact on your score. The financial experts at Creditstrong.com confirm the fact that you can easily improve your financial status with the help of on-time payments and multiple credit accounts. So, try that and you’ll definitely be thankful for it.
- Credit age – This factor has a 15% bearing on your score. Check the age of all your accounts and see which account you have used recently. A long history is favored, but a short one can work well too unless you have paid your bills on time.
Therefore, financial consultants advise you to leave your accounts open whether you use them or not. The age of your account will help in boosting your score. For instance – If you shut your oldest account, your score might decline. And you wouldn’t want that. Right?
- Account mix – This is the factor where the FICO score is examined to see the number of new accounts you have opened, which account you have recently used and opened. It makes 10% of the score.
- Recent credit – This element constitutes 10% of your score. Soft and hard inquiries are made when you open a new account. Soft inquiries mean determining your own scores, while a hard inquiry is where the lender checks your report before lending you the money. A single hard inquiry can have a minor effect on your financial statement.
It takes years to build a worthwhile credit history. You are also rewarded when you maintain it well. Because a good and positive financial history will lead to significant savings, better availability of loans, and insurance discounts. And after you are financially sound on papers, applying for the loan to purchase your dream house or apartment will no longer be challenging!