Credit scoresare used by credit providers and lenders to determine which credit products to offer you, and if you can afford the credit you are applying for. Maintaining a healthy credit profile and good credit score enables you to borrow money when you need it the most – for an unexpected event, unforeseen expenses like car repairs, and lots more.
Behind the credit score number you see on your credit report, there are factors that can either positively or negatively affect your credit score. In this blog post, we will share what these factors are and how you can build your credit score.
Hard enquiries
When you make a loan or credit application, credit providers will conduct ahard enquiryin order to look at your credit report to assess your credit worthiness. These hard enquiries can negatively affect your credit score. It is best practice to try and avoid making too many loan or credit applications within a short space of time. Rather wait 30 days between each application toimprove your chances of being successfully approved.
Having no credit history
To have a credit score, you need to show that you’ve used a credit product before. If not, it may be difficult for you to show credit providers that you are capable of using and repaying credit responsibly. Lenders like FASTA offer credit to those who don’t have a credit history. This will help youbuild your credit, and ultimately improve your credit score.
Your payment history
Your payment history is the most important part of your credit score as credit providers want to be sure that you can pay back your credit, and pay back on time. If you have missed a monthly repayment, this will have a negative impact on your credit score and will appear in your credit report as a missed payment.
Your credit usage
If you are using too much credit, this is going to affect your credit score and raise red flags for credit providers as they will think you are too reliant on credit. Rather apply and use credit only when you absolutely need to.
How to build your credit score
- Pay your account on time. Remember, your payment history is an important factor in determining your credit score, so you need to pay your debt on time every month to improve your credit score.
- Apply for credit with a responsible lender, likeFASTA, to help you manage and repay your monthly instalments.
- Avoid making too many credit or loan applications in a short amount of time.
For more information on credit scores, read this blog post onHow to Effectively Build Your Credit Score from Scratch.
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