Your credit report is one of the most important parts of your financial health. Staying up to date and understanding the ins and outs of the decisions that affect your score will empower you financially. In this blog we are going to dive deep into what factors affect your score, which factors you need to be aware of, and how you can build a better credit score. Read until the end to get access to our free credit monitoring platform, with in-depth credit report information at your fingertips.
What Factors Affect Your Credit Score?
Because your credit report provides financial institutions, employers, and lenders important information about your ability to manage your finances, there are many factors which affect the overall score. Some of the most important factors are:
- Total debt (+/- 30%)
- How long have you been credit active (+/- 15%)
- Type of credit which you have (+/- 10%)
- Payment history (+/-35%)
- Inquiries (+/- 10%)
The Difference between Soft and Hard Credit Enquiries
As we mentioned above, inquiries form approximately 10% of your overall credit score. There is however a difference between soft and hard enquiries.
Soft enquiries such as checks from potential employers, or your checking your own report regularly, does not affect your credit score at all.
Applying for a new credit card, clothing account, or applying for a loan is a hard inquiry or hard pull and does affect your credit score. The more times you apply for credit the greater the chance that your credit score will be negatively affected, especially if you are not successful, as this might show that you are in financial difficulties.
How Long Does a Missed Payment Remain on Your Credit Report?
Your credit report holds information about all your accounts, including where and when you have missed payments.
This information remains on your credit report for a period of two years.
After this time has lapsed, new information about your financial habits will replace it. This means that if you are finding yourself in a negative situation with missed payments, you can remedy your credit report completely by choosing to pay accounts on time and thereby show financial stability after only two years.
Which Other Factors Remain on Your Credit Report and for How Long?
Other factors which can remain on your credit report are:
- Hard enquiries – up to 12 months
- Debt restructuring – until clearance certificate is issued
- Court judgements – 5 years depending on the nature of the judgement
Tips to Build a Better Credit Score
Looking after your credit score is an important financial decision. It will impact every corner of your financial life. Building a better credit score begins by being honest with yourself and your financial situation. Begin by analysing where you need to take action.
Is there debt which you have not been able to afford? Do you need assistance in taking care of this debt? If yes, then proven solutions such as debt review will be able to help you become debt free in an affordable manner.
Try to minimise the number of hard enquiries. If you do not need the loan or have already been rejected by a financial institution, do not make more enquiries as this will only pull your score down. Plan out your finances and learn to budget like a superhero instead. A budget and or spending plan can really help you to stay focused and on track to building a better credit score. Watch our video on budgeting here with free downloads.
Get Free Access to Your Credit Report Now
As we promised, here is your access link to your free credit report with tips and tricks on how to build your credit score and how to pay your debt off one account at a time.