Articles, Credit Score

What Factors Affect Your Credit Scores

Written By: Eric Williams
Reviewed by: Mike Reyes
Last Updated November 1, 2023
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Checking your credit rating by using the credit score monitoring app from SoFi is the best way to get 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.

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 factors that determine your credit rating. Not all the factors count towards your credit score equally, but they are all critical 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 concerns the credit amount owed. The lenders will often consider your current monthly income and the amount you wish to borrow. The requested loan amount should be according to your income for having a positive credit score.

Yet another essential 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 each repayment.

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

Lenders’ main tactics 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, ensure you pay every installment on time, avoiding being late for more than 30 days. You can also arrange the terms 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. Ensure you never use more than 30% of your available credit, which 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 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 factors including utilization rate, history, amount of credit accounts, etc.

Lenders could perform a hard credit check which could stay on your credit history, or a soft check that leaves no trace. Also, checking your credit rating won’t reduce the FICO score value while you get valuable information 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.

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