Your credit score is an important factor in determining your ability to commit to financial obligations and commitments. Though it might not make much sense at first, having a report on your ability to pay off debt often says a lot about your personal traits and financial stability. These properties don’t necessarily depend on the amount you earn, but rather on your character and personality traits, which a lot of people who are supposed to do business with you will find important. A reliable associate is always the best choice for everyone. But, before we get to things that determine a credit score, let’s look into what the credit score is actually used for.

Your history with making financial commitments and sticking with them will follow you along the way. There are many situations in life where you have to affirm your credibility so that people who are supposed to associate with you know that you are trustworthy. Some of these situations include getting a loan from a bank or a lender, renting an apartment or a house, buying a car, signing business deals or looking for someone who will financially support your business. Getting funds for projects you are working on is also something you will only be able to achieve if you can prove to be able to honor your financial commitment. In a form of a report, your credit score reflects this ability. But, what are the things that go into your credit score?

The number one thing is your credit history. It takes up about 35% of your credit score. This measure reflects your ability to make timely payments on settling your debts. The longer you have managed to make timely payments, the better your credit score will be. There is another catch to this. Not having any loans or credit debt to pay might actually reflect badly on your credit score. For this reason, you shouldn’t shy away from credit, but rather focus on spending within your ranges and paying off on time.

The amount you owe is the second biggest factor. The amount you currently owe in proportion to the overall amount credit you have available will go towards 30% of your credit score. This is a significantly high percentage to take, meaning that you need to make sure to owe as little as possible at the point where you need a high credit score.

The length of your credit history will take up 15% of your credits score. The longer you have your credit used and paid off successfully, the higher your credit score will be. This is also why you shouldn’t avoid using your credit. The remaining 20% goes on the credit you are currently using, where it’s desirable to have as less debt as possible. Remember, your credit score will go high as you use your credit continuously in moderation, not if you completely avoid it.

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