What affects your credit score the most?

On Behalf of | Oct 2, 2020 | Bankruptcy, Chapter 7

Before a lender can offer you money, he or she will check your credit score. Forbes explains that your credit score helps lenders determine whether you are a trustworthy borrower.

Your credit score can be anywhere between 300 and 850. The higher your score, the more likely you are to receive credit cards, loans and other forms of financing. After filing Chapter 7 bankruptcy, you must rebuild your credit. It helps to know what makes up the final score.

How much does payment history contribute?

Payment history may contribute to about 35 percent of your overall credit score. As you rebuild your credit, you should be careful not to miss any payments. The longer that you miss a payment, the more your credit score will suffer. Bankruptcy is a part of the payment history category. It implies that you could not keep up with your payments. While bankruptcy stays on your record for 10 years, good credit habits can make up for the credit mistakes in the future. The impact of a negative payment history goes down over time.

Does the owed amount matter?

If you have a high credit balance, it can hurt your final score. Try to maintain a low balance-to-limit ratio. The credit utilization ratio makes up almost as much of your credit score as the payment history. It can account for around 30 percent of your score. Scoring models may consider how much debt you are in and the categories of debt. On top of your utilization ratio, the age of your accounts is another 15 percent of your credit score.

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