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Understanding Your Credit and Factors that Affect It

Last updated 2 years ago

Your credit score follows you for the entirety of your adult life. It can determine mortgage rates, credit card availability, and your ability to obtain other loans. However, most Americans know little about how their credit is evaluated by lenders. Here are the three biggest factors that affect your credit and can impact future loans:

Past Payment History 

When banks look at your credit printout, the most important indication of your creditworthiness is a strong past payment history. Lenders will evaluate the consistency with which you made payments as well as whether or not you missed any deadlines. Frequent forgotten payments can hurt your overall credit rating. It is also generally better to have more than one credit card, even if you mostly use a single one.

Amounts Owed

Another important factor that affects your credit is the total amount owed on each of your lines of credit. Are you carrying a large balance on all of your credit cards? If so, banks may perceive you to be a risky customer. Paying off your credit card balance every month can help increase your overall creditworthiness and aid you in qualifying for low-interest loans.

Length of Credit History

Lenders want to minimize the risk of taking you on as a client. A long credit history dating back to college or high school shows that you have been consistently making payments for a long time. The more established your history, the higher your FICO score.

Your credit score depends on a combination of a number of different factors. If you carry too much bad debt, debt negotiation can actually rehabilitate your credit score and let you start anew. Southern California residents in need of financial legal help should contact the Golden State Law Group. We can help determine if debt modification or counseling is the right solution, so call our San Diego office at (619) 234-3333 to schedule a free consultation today.


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