How to Interpret Credit Risks and Scores

Published on Oct 25, 2013 07:34 am

Your credit score is numerical representation of how you handled some of life’s financial events, like landing a new job or buying a new home.

What Your Score MeansYour credit score and report have an influence on how easily you can borrow money and how much borrowing will ultimately cost you. It can sometimes affect your home mortgage rate, your auto loan terms, or even whether you can rent an apartment.

If your score is stellar, lenders will want to let you borrow money – your positive credit habits say they’ll get it back, plus interest, so lending to you is a wise business move for them. In exchange for this surety, they might charge you less interest than another person who has an iffy score.

How Your Score Is CalculatedA credit score can draw from several different factors, and some have more weight than others.
• One factor is whether you make your payments by their due dates
• How much credit you have available can play another influential role in your credit score
• The length of time you’ve been borrowing and the age of your accounts can also contribute
• Applying for several credit accounts within a short period of time can hurt you – as credit inquiries can also impact your score
• Finally, creditors want to see a balance of different types of accounts on your history. Having a variety of different accounts also affects your score and shows lenders the different types of loans you balance.

Remember, there are hundreds of scores available that lenders may use when determining your creditworthiness, and these are just some of the potential factors that can come into play.

What Can Make You a Credit Risk?Creditors and lenders have certain things they look for to identify someone who is a credit risk.
You might make payments on time without a hiccup every single month, but this excellent track record accounts for only part of your overall score. If you haven’t established a long credit history or keep your card balances very high, these issues can bring your score down.

Opportunities Attention to detail can help you avoid being labeled a credit risk. Learn how to avoid making common credit mistakes, like making late payments or maxing out credit cards. Be sure to check your credit regularly to measure your progress and identify areas that could use some improvement on your part.

About the Author
Beverly Bird has been writing professionally since 1983. She has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2013, Inc.  All rights reserved.

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