How to Create a Good Credit Score

A credit score is usually a numerical value calculated on the basis of a person’s credit file, reflecting the creditworthiness of that person. A credit score can fluctuate widely depending on the many variables that are considered when calculating it, including but not limited to, how long a person has been established in his or her line of work, their financial activity and risk tolerance, their current income level and their credit status. A credit score reflects a credit file’s summary of the borrower’s current financial position relative to his or her chronological age. A credit score helps the lender determine whether a borrower will be able to pay the debts he or she owes. There are many reasons for lenders to use a credit score to approve or disapprove a borrower.

The most important vantagescore to a borrower’s chances of getting approved for financing depend largely on how many times the Vantagescore is improved. Therefore, one has to work diligently to improve their credit score, and the easiest way to do so is by obtaining at least one free credit score from each of the major three credit reporting agencies (Equifax, Experian and TransUnion). These reports are free every year, usually on an installment plan. However, to maximize your opportunities for improved scores, be sure to check your reports often. Also, be sure to check them frequently for old issues that may have been missed by the credit bureaus and have them fixed immediately.

One of the biggest factors that affect a borrower’s score is their payment history. It is calculated using information from your payment history on all accounts except those with the least payment history (which is the default). Therefore, a good payment history is an important factor in the calculation of your score, as well as being the most important variable in determining whether or not you should be approved for credit. This is due to the fact that if you consistently pay late and/or skip payments, the credit reporting agencies will deem this as “risky” behavior, and consequently have negative entries into your credit report and score.

Another significant factor is the total amount of debt a borrower carries. The higher the amount of outstanding debt, the lower the score. If a borrower does not currently have any revolving credit accounts, they should begin building their credit mix by opening a small, secured credit account and gradually working it up over time. While it is not necessary to have actual cash on hand to open the secured credit account, it is best to have some available credit to allow room for the borrower to build their credit mix over time. Ideally, someone who is not currently carrying a balance on any of their credit accounts should begin building credit by only opening credit cards and small loans.

The third most important factor in determining a good credit score is the total number of inquiries that a borrower has made within the past seven years. Each inquiry is assigned a “credit score” which is then used to determine what interest rates the borrower will be offered. Having several inquiries within a seven-year time period will result in a higher number of credit offers, which means a potential for greater overall savings. In addition, any inquiries made within the past seven years also have a positive impact on the overall score. So, if a borrower has made no inquiries in recent times, or has only one inquiry, they have a better chance at receiving lower interest rates and a more favorable credit card offer.You can download The Good Steward Financial System on your Iphone or Android device and start the credit score management process today.