5 Things That Affect Your Credit Score

Credit scores can be complicated at times. However, Credit scores play an important role in determining your credit worthiness and how likely you are to receive a lower rate for financial products like mortgages and loans. As there are various factors that affect your credit score, here are five things that may be affecting your credit score that you may not know about. 

Having More Revolving Credit than Installment Credit
Let’s first go over the difference between revolving credit and instalment credit. Revolving credit is automatically renewed as debts are paid off. The best example of this would be a credit card. Instalment credit is something with a fixed number of payments, an example of this would be a loan or mortgage payment.

 Too many telephone credit applications
You may be shopping around for a new phone or phone plan to get the best deal. However, when you are applying for these services, most carriers will run a credit check. 

This is considered a hard inquiry. Something like you checking your own credit score is considered a soft inquiry and will not affect your credit score. When you start to apply for too many phone companies and start getting a fair amount of hard inquiries, creditors will see that as a sign of seeking too much new credit. 

Overdue Tickets
Have an overdue parking ticket? This ticket could be causing damage to your credit. If it is left unpaid for long enough, it could go into collections. A collections account could stay on your credit report for up to 6 years. 

Closing your oldest credit account
Credit history makes up around 15% of your credit score. This is weighed by how long you have had your accounts open and how long you have been using these accounts. Therefore, it is important to research if closing an account will have an affect on your credit score. More times than not it would be best to close an account that has less credit history. 

Applying for a credit limit increase
Applying for a credit limit increase will normally trigger a hard inquiry from your credit provider. Your credit issuer will normally look at things, like your current credit, payment history and your job status. If you are in a good financial state, applying for a credit limit increase is not a problem. 

However, if your credit is a little iffy or you are not making payments on time, now might not be the best time to apply for a credit limit increase. Instead the best option would be to wait until it is offered to you by your credit provider.