When it comes to financial matters, your personal credit score is a crucial figure that can make or break your plans. Many banks, creditors and financial organizations will grant their decision on whether to approve your credit application or how much interest rate you will be given based on the information in your credit report. Needless to say, a higher credit score will not only help you win quick approval from lenders, it will also help you give you access to the best deals in the market.

However, what factors can affect your credit score? Some myths are circulating that personal factors such as race, age, religion, educational background and gender can affect your credit score. But this is misleading and not true at all.

The most widely recognized credit scoring system, the FICO model created by Fair Isaac Corporation uses five factors to calculate credit scores. These are payment history (35%), credit utilization (30%), length of credit history (15%), types of credit used (10%), and credit inquiries (10%). Let’s take a closer look at each of these factors.

Payment history. Timeliness of payment or prompt submission of payment to all your creditors can be considered as the most important practice you can do to build and maintain an excellent score. This mean paying your credit card bills, loans, and utility bills on time and avoiding missed due dates.

Credit utilization. How much of your credit line do you regularly use? If you own a credit card, experts recommend not using more than 30% of your available limit. By keeping your credit usage minimal, you minimize the risk of debt build-up and protect your credit score.

Types of credit. Owning multiple credit cards will not win you a higher credit score. Instead, you want to prove your capability to manage different types of debt- aside from revolving credit. Thus, having at least two loans in your name is a good way to show your credit worthiness and to raise your credit score.

Length of credit history. The older your credit history is, the more credit worthy you will be in the eyes of lenders. This is why students are encouraged to start building credit history while still in college. Thus, by the time they graduate, they can be in a better position to apply for a personal loan, a car loan, to rent an apartment, and apply for a job.

Credit inquiries. What kind of credit inquiries can affect your credit score? Contrary to what others believe, checking your personal credit report will not damage your credit score. In fact, consumers are advised to check their personal credit reports regularly or at least twice a year to ensure that all information contained in their report are accurate.

However, hard inquiries or inquiries made by potential lenders in response to your credit application can pull down your credit score. Each time an inquiry is made, you can lose a few points from your score. Therefore, submitting multiple applications to different lenders at once or frequently applying for new credit can badly hurt your final rating.

About the Author
Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of http://www.newhorizon.org such as their continuous effort in giving out Free Credit Repair and Building Ebook. NHBS also has a list of recommended Credit Cards for Bad Credit

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About Melanie Mathis

Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair and Building Ebook. Connect with Melanie Mathis on Google+