The credit score is undoubtedly one of the most important aspects of any person’s finances and National Debt Relief aims to help consumers understand it a little better. The recent article titled “Credit Scores: How Do They Come Up With Those Numbers?” released July 5, 2017 looks into some of the most important factors that makes up a credit score.
The article starts off by explaining how a person’s payment history forms an important part of a credit score. The report looks into timely payment of bills, debt and other financial obligations of a person. It is able to reflect on-time as well as late payments on these bills and debt payments. This is a great barometer on how people value their financial responsibility and allows lenders to gauge borrowers.
The article also explains that a credit score looks into the amount owed by consumers. This is known as the utilization ratio. The closer the debt amount is to the limit, the higher the ratio is. The higher the ratio, the more likely a consumer would miss a payment because their finances are stretched out. This is why it is important for consumers to keep the ratio as low as possible.
Another important component of a credit score is the length or history of accounts being reviewed. It is beneficial to have accounts that has a lot of repayment history in it. This is why the article encourages consumers to keep some of their old accounts especially credit cards and not cut them up when they get new ones.
The article also shares how opening a lot of new credit in a short amount of time could negatively impact their score. For one, a hard pull can cause their credit score to dip. If done multiple times in succession then it would pull the score down. Another is that lenders are wary about consumers opening up a lot of accounts.