Lenders have to decide that whether they should give you the loan that you have applied for your personal needs or not. They judge this by observing your credit scores and on that basis, you will be able to get the loans.
Most of the people are not aware of the credit score. But, it is necessary for you to know about the credit score if you are going to apply for the loan soon. So, to get credit now you must read the full information given in this article.
What is a credit score?
A credit score is a three digit number which is used by the lenders to judge your capacity and also to meet your financial obligations like car payments, mortgage payments and loans repayment. After getting this kind of information the lenders came to know that how and after what time period you can pay your debt.
If you have the higher credit scores the chances are that the lenders will give you the required loan on good interest rates. If you have fewer credit scores then it may happen that lender will not find you trustworthy and won’t give you a loan.
It may also happen that lenders may provide you loans but at very higher interest rates.
What is credit score made up of?
Your credit score consists of the following elements:
- Payment history
Payment history indicates the ability of yours to pay the bill on the given time. 35% of your credit score depends upon the payment history. With your payment history lenders judges your behavior related to payment of the debts.
- Amounts owed
30 % of your credit score is represented by the owed amount. It indicates the amount of the debts you contain in comparison with your credit limits.
- Credit length
Credit length indicates 15% of your credit scores. The longer history you have the better your scores become. This represents that your past financial behaviors would remain same in the future ideally.
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