Checking your credit rating is the best way of getting an insight into your credit capabilities when looking for a loan. Also, credit scoring companies have their ways of figuring out the factors that determine your credit score. The main factors that affect your credit score include credit utilization, history of payments, and amounts owed.
The founder and CEO of AdvanceSOS, Nick Wilson, shares his insight into the aspects determining your credit scores. With his experience in financials, combined with this guide on the main credit score determining factors, you get to understand how loans work a bit better.
AdvanceSOS is a loan service founded by Nick Wilson, an experienced loan officer. Using its fast application that connects borrowers with licensed lenders, you can easily get payday loans with same day deposit with AdvanceSOS, even with bad credit for your emergency needs.
What Are the Main Factors that Affect Your Credit Scores?
Besides the mentioned points based on which credit scoring companies determine your rating, there are also other points of interest. Although a credit check conducted by the lenders only takes a few hours, all the valuable info fits right in.
These are the most prominent aspects that determine your credit score when you apply for a quick cash advance or a title loan:
- Payment history
- Credit utilization ratio
- Amounts owed
- Credit portfolio
- Current credit account
As you can see, there’s a list of different factors that are considered to determine your credit rating. Not all the factors count towards your credit score equally, but they are all important when forming the final rating. I’ll lead you through the specifics so you can know all the details the next time you apply for a payday loan or installment loan.
Besides the main factors mentioned, it also has to do with the credit amount owed. The lenders will often consider your current monthly income and the amount that you wish to borrow. The requested loan amount should be according to your income for having a positive credit score.
Yet another important factor besides utilization rate and payment history is your credit mix. Also known as credit portfolio, this factor contributes about 10% to your credit scores. It includes a diverse portfolio of different credit accounts and how well you can manage the repayments of each.
As for your current credit account, having too many accounts open could negatively reflect your credit score. Instead, if you can close a current credit through monthly payments regularly before getting another loan, you could enhance your rating with future lenders.
Payment History Impact on Credit Scores
One of the main tactics that lenders use when testing your credit repayment compatibility is checking your payment history. As a crucial factor that contributes about 35% towards your credit score, this aspect involves all of your previously-paid credits.
If you miss a single payment or arrange a delayed repayment with the lender, future lenders will recognize it as a threat. To ensure that your credit rating is above average, you should pay additional attention to repaying every installment on time.
To get leverage on this aspect, make sure you pay every installment on time, and especially avoid being late for more than 30 days. You can also arrange the terms previously with the lender, to prevent missing your future payments.
Credit Utilization Ratio Is Crucial
You can check the details of your current credit score and the credit limit before applying for a short-term loan or other loans. Make sure that you never use more than 30% of your available credit as it significantly reflects your rating.
You could get ahead of this factor by paying additional balance through the month or making a financial plan based on which you’ll act with monthly repayments. The credit utilization ratio is usually expressed as a percentage. It can be calculated as the revolving credit you are using divided by the amount of credit at your disposal.
What’s the Meaning of Your Credit Score?
As a borrower, you’ll want to get a cash advance with the most convenient interest rate, and your credit score mostly determines your ability to do so. It’s expressed as a value between 300 to 850, while you should be able to get payday loans or installment loans up to the score of 600.
It’s also based on the lenders, as you can sometimes arrange specific terms. The mentioned value is calculated as your FICO score based on the mentioned factors including utilization rate, history, amount of credit accounts, and others.
Lenders could perform a hard credit check which could stay on your credit history or a soft check that leaves no trace. Also, if you check your credit rating you won’t reduce the FICO score value, while you get valuable info in return.
Final Thoughts on Credit Score Factors
Hopefully, this guide gives you all the aspects you should be aware of when applying for a new loan. Knowing your credit score value could be crucial if you wish to get allowed for the loan. Make sure to pay attention to all the mentioned contributions for your rating.
Based on your credit score, the AdvanceSOS service can connect you with a lender with convenient conditions. Our app only brings you the lenders that are suitable for your credit rating value.