Credit scores affect your ability to apply for loans and mortgages. Many people are unaware of all the factors that determine their score. To take better control of your score, consult the guide below to learn more about how it’s calculated and what you can do to increase it. 

Is a Credit Score Necessary for a Loan? 

Lenders want to feel confident that they’ll be paid back after giving you a loan. The credit score solidifies your reliability, telling the lenders how much risk they’ll take in letting you borrow money. The higher your score, the lower their risk, so they’ll be more willing to provide what you need. In many cases, a poor score will render you ineligible to borrow at the amounts and rates that you’d prefer. 

For decent loans and mortgages, lenders will look at good and excellent scores. Good scores range from 680 to 739, while excellent scores range from 740 to 850. Aim to fall within those ranges by avoiding making mistakes that could affect the score.

What Affects Credit Scores? 

The credit cards and lines that you take out need to show that you can take on financial risk without having to borrow money anytime you need something. The ratio of your debt to your credit limit is important as well, as a high one suggests that you’re struggling. 

The age of your credit accounts is also taken into consideration. Keeping old ones open makes you look reliable as long as you’re keeping up with payments. Making at least the minimum payments on time will prove that you’re dependable and financially capable. If you miss payments on your rent, utilities, child support, medical bills, or even parking tickets or gym memberships, your score could decrease. 

How Can You Improve Your Score? 

Take out as many credit cards and loans as you want as long as you keep your total debt to 30% or less of your total credit limit. However, make sure you have at least two or three lines. It shows that you can handle risk without depending on it. Avoid closing old accounts. If you must close an account, keep at least a couple of others open. 

If you have trouble making punctual payments, set them up online to be taken from your checking account automatically. If you get parking tickets or other miscellaneous fees, pay them right away. Try not to use another credit line for these transactions, as it doesn’t look good to pay off debt with more debt. 

 
To learn more about how your credit score works and improve your odds of getting great loans, contact Alliance Credit Union in Fenton, MO. As experts in financing since 1948, they’ll assess your score and help you establish excellent habits so that you can raise the number and keep it high. They also boast low rates and 24/7 access to your funds. For details, call (636) 343-7005 or visit their website.