To your credit: How your credit history will affect your credit future

Nicole Si
Mar 10, 2020
To your credit: How your credit history will affect your credit future

When your financial status changes, your credit score does too, so knowing what variables and kinds of accounts influence your credit score will give you the chance to enhance it over time.

Top 5 Factors That May Hurt Your Credit Score

Here are the most common denominators impacting your credit score:

Payment History

Payment history is one of your credit score’s most crucial aspects—even a 30-day non-payment or missed payment could have an adverse effect.

Lending institutions want to make sure you’re going to pay back your debt and on time when they’re considering you for a new loan.

How you use your Credit

Your credit usage ratio is calculated by separating your current total rotating credit by the sum of all of your rotating credit limits. This ratio examines how much of your accessible credit you use and can provide a glimpse of how dependent you are on non-money resources.

High use of credit can be a red flag for lenders as it shows that you depend too much on credit.

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Previous Loan Inquiries

Every time a lender asks for your credit report as part of their decision-making process, hard inquiries are registered in your loan file. Hard inquiries stay for up to two years in your loan file and may have a detrimental effect on your credit scores in some situations.

Loan institutions look at how many hard inquiries you have to gauge how much new credit you are asking. In a short time, too many loan inquiries can indicate that you are in a poor economic situation or that you are being refused new credit.

Your Other Credit Accounts

Individuals with top credit ratings often have a varied loan account portfolio. Models of credit scoring consider the types of accounts you have and how many of them. This credit mix is used by lenders to know previous debt experiences and how you managed them.

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Negative Information

The impact on your credit score of negative information relies on your general credit profile and what sort of record it is.

Delayed or missed payments, collection accounts, foreclosures, and charging-offs are all instances of negative information that may appear in your loan file. For years, even up to a decade, each of these can seriously harm your credit score.

These data usually remain in your file for at least six years, so if possible, it is best to prevent any adverse infringement.

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