3 Key Aspects To Affect Your Credit Score if You Are Not Careful

Do you know what your credit score indicates? Well, it shows whether you have a record of stable financial steadiness or not. It also indicates whether you make your payments on time or delay paying your bills frequently. If you default payment, your score will dip. The score may vary from 300-850 and depending on the details in your credit file; the bureaus will compute your credit score. 

According to an article published in Forbes, a credit score report lets you know about your financial standing and what areas you need to focus on to improve the score. 

There are a couple of factors to affect your credit score. Here are the three most essential ones: 

1. The number of loans you owe

You make all loan payments on time, but consider what would happen if you have a breaking point? FICO score takes into account the credit utilization ratio, which signifies how much you owe to creditors in comparison to your current credit limits. 

What amount of accessible credit you have utilized? Avoid presuming that you need to have a $0 balance to attain a high credit score. Though less is good, owing some more could be better than owing zero amounts. That is because the lenders will try to understand that if you take a loan, whether you have the responsibility and financial solidity to repay the borrowed amount. 

2. Payment record 

When a lender agrees to lend you money, he will have one thing in mind. Will I get the borrowed sum back? Every lender asks this question. The essential element of your credit score is whether you are reliable enough to repay the loan that you borrowed. 

If you need to know how you can improve your payment history, you may get in touch with agencies such as your score and more or similar ones near you. 

When you are late in making payments, it is important to understand how late you were like a month, two months, or more than that. The more time you take to repay your loan, your credit score will get worse. 

When one of your debt accounts goes to the collection agency, it is a warning sign for you because prospective lenders will think that you do not repay loans. 

3. New loan or credit 

Your credit score takes into account how much new credit you now have. It means the number of new accounts you opt for, of late, and when was the last time you opened a new account. When you apply for a new loan or credit, the lenders will inquire, do a reality check of your credit details, especially during the process of underwriting. It’s called hard inquiry or hard pulling, and different compared to a soft inquiry, which means recovering your credit details. When it comes to hard pulls, it may result in a temporary, small dip in your credit rating or score. That is because if the percentage of your newly opened accounts is higher than the total number, you have more credit risk.


Your credit score is extremely important if you are applying for loans and want to get the best rates of interest. Therefore, make timely payments and improve your score.  

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