In today’s day and age, most people have a pretty good idea of what their credit score is thanks to society’s reliance on credit for many different aspects of our lives. While it used to just be for obtaining credit cards and purchasing a home, now our credit determines a countless number of other things such as deposits to turn on utilities and the number of lines we can have on our cell-phone plans.
To ensure that you’re in the best financial position in your life, it is vital that you make sure to do everything you can in order to have your credit score at, or above, an acceptable level – generally considered 620. Whether you have a high credit score which you want to keep in good standing, or have had credit issues which you need to raise, here are five areas where you need to pay attention to as they are some of the top items which influence your credit score rating:
- Payment History – Your payment history consists of both the on-time and late payments which you have made to creditors in the past. Having a number of delinquent payments can have a huge negative effect on your score, while a steady history of positive payments is a cause for a rising credit rating.
- Number of Accounts You Possess – You don’t want to have too many different credit accounts open at once. Many lenders look at this as you’re being financially unstable and unable to manage your personal finances. While having multiple credit lines is acceptable, do not let this number get out of hand.
- Age of Your Credit Profile – Having a long list of credit history is going to put you in a much better position that a new borrower with little-to-no records. Lenders see a long history as a sign of responsibility, and some estimates have put your credit history’s age as the determining factor of up to 15% of your credit rating.
- Balance of your Accounts – While your credit card company may enjoy you paying all of the interest each month on a maxed account, other lenders won’t feel comfortable lending to someone with such a history in handling loan balances. Most financial advisors recommend keeping debt-to-balance at a maximum of 50%, but generally closer to 30% is preferred. This shows that you are able to handle credit repayments, and are also responsible enough to steer far from reaching your limit
- Diversity of Credit Sources – We already determined that having dozens of different credit accounts is a bad thing, but it is a plus to have a diversified mix of credit lines. Spreading your borrowing across a number of different categories such as mortgages, car payments, utilities and small loans can ensure you get the highest score possible thanks to diversification.
No matter where you are with your financial life, these five areas are topics which anyone can focus on and see improvements over time. If your personal finances are in check, follow this guide to make sure they stay in the target range. If you have a subprime score, paying attention to these tips can help you raise your rating and make many aspects of your life much simpler.