Your credit score indicates an evaluation of your credit records based on previous and existing loans. It reflects your liabilities with your creditors as well as serves as documentation of your payments, updated or delinquent remittances and other matters that certify your business dealings with lenders. A credit score assists lending companies in deciding whether or not to approve applications for loans, depending on the your paying capability.
Time was, when information on credit scores was obtained solely from credit agencies. Hence a borrower will only know if he is fit for loans after credit reports are released by the credit bureau. It used to be somewhat a guessing game as he waits for results to finally know if he can avail of a loan. Well, it's a big relief now that one can actually use a credit score calculator to evaluate one's own credit merits. Here are some tips:
- Do it the traditional way, akin to how a professor computes the grades of students in school. But even though the procedure is very similar to grade calculation, the figures you will be using are different from test scores as you will apply instead your credit information.
- Give your payment record a 35 percent weight. Your payment record or history reveals if you are a diligent payer or a delinquent one. The creditor naturally wants to make sure that you are a faithful borrower and that you have no records of bad debts and questionable deals.
- For your existing debt, allocate 30 percent. For instance, you may have current obligations with your credit cards or car and home mortgage. Obviously you will get a lower credit score if you are handling several credit cards on your account. It is best therefore that you maintain at least 25 percent or lower for your card limits to improve your credit score.
- Assign 15 percent for the time-span that you have been a borrower. For example, if you have already established a credit record of, say, 10 years, then you have ample credit information on which you can base your credit score. This is a plus factor for you as lenders can forecast if you are indeed a reliable borrower. Hence your chances of being granted a loan are very high.
- The queries you answered in your report get a10 percent allotment. These queries are about your current credit transactions particularly your credit card applications. If your report shows more credit card use and numerous loans from various financing companies, your credit score may suffer badly.
- Your present credit standing is given 10 percent of the credit score. This refers to the amount of outstanding loans and credit card borrowings as against the remaining credits due you.
There are available online devices that you can use as simulator to monitor your credit score. You can also seek credit help from certain providers of online credit report. These sites: walletpop.com and credit.com can help you check credit accessibility and to determine your credit ranking. Keeping track of your credit score is important so you will know if you are eligible for loans and credits. By doing so you are also able to maintain a good credit standing which is essential in future deals.