Have you ever thought of how the credit score was calculated? There are actually 6 factors that can be used to determine the credit score of a person and each component comes with a different weight when it comes to refinancing the mortgage.
Some of the components which are calculated to determine someone's credit score: past credit history, the total amount of available credit, sum that is owed to the bank or credit card company.
Here's the exact breakdown on how score is calculated: 35% of the credit score is calculated through the payment history of the individual, 15% of the credit score is determined by the length of time that that particular individual has been using credit, 10% of the score is calculated from the new credit that has been obtained and also the inquiries that have been made into the credit file.
The last 30% of the score is calculated through the debt that has been obtained.
Why is the score so important? The score is one of the most important numbers that is calculated through these means.
It can influence whether you are granted credit and the changes to the limits in which you are granted.
When it comes to the financial history, the score is important but it is also important in things like auto insurance quotes, which can take into account your score while calculating the premiums of the customer.
Once you've know how the score is calculated you can start taking measures to maintain the credit score and even increase your score.
Reducing the debt can help to increase the 15% of the rating or score that is calculated based on the amount of debt that an individual holds and lowering the amount of new credit accounts that are opened through the various available sources of credit can be a good way to increase the score.
There are quite a few things that you can do to increase your credit rating and score if it is not high enough.
One way is by negotiating with your creditors and remove collection accounts from the score or use secured credit to build the credit rating score are all good ways to increase your score, as well as lowering the total amount of debt that is present on your score.
You might also want to check out other websites on the internet to learn more about your financial status.