Last Post On : July 28th, 2013 - Sunday
How To Improve Your Credit Score?

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Getting Your Free Credit Score Government Sponsorship

Credit Score is a score or a number that indicates how risky or safe is lending to a certain person is. It is indicative of the chances the borrower may default on a loan or may miss a payment. The lending institutes base their decisions regarding lending to an applicant based on this credit score. Less numbers of people know how to get their free credit score government sponsored.

Your credit score also affect the interest rate that you will have to pay on your loans. A higher credit score translates into a less risky situation for the lending party and hence a lower interest rate is applied.

Determination of Credit Score

People’s credit scores are based on the insights and information that is collected by three consumer reporting agencies. There are different credit scores commonly in use; however, all are quite similar in principle. Credit scores are calculated based on the borrower’s credit history, making use of statistical calculations to determine the risk factor. How this happens is that the system finds out a group of people having a similar credit history like the borrower’s, and projects his expected credit performance based on theirs.

Definitions of Credit Score

Lenders use approximate credit score ranges to define a borrower’s credit worthiness. These ranges can also be acquired from free credit score government sponsorship websites. According to these ranges, a credit score of 720 and above is considered great; 680 – 720 is good; 640 – 680 is deemed fair; while any number or score below 640 is taken as poor.

Factors Affecting Credit Score

There are many factors that lenders look at before issuing a loan. Different factors affect the credit score at a different level. Moreover, different lending institutes carry their own guidelines on credit score and its ranges, as well as the factors they consider before approving a loan. It is always a good idea to get a free credit score; government sponsored before approaching lending parties.

The factors affecting the decision of approving a loan, often depends on the following factors:

  • Timely Payments: The lending institution will look into how timely you make your loan repayments. This factor’s weightage in the lending decision is about 35%. People who miss one or more of their loan payments, by a margin of more than 30 days can be sure to see a significant decrease in their credit score.
  • Revolving Debt to Credit Limit Ratio: This factor has a 30% weightage on your credit score. The higher the credit limit on your cards that you use, the negative will be the effect on your credit score.
  • Length of Credit History: The more amount of time that has passed since your last credit application, the better. Accounts for 15% of your credit score weightage.
  • Types of Credit Used: Good credit such as house mortgage has a better effect on your credit rating as compared to lesser good ones like credit cards. 10% weightage.
  • Result of Recent Credit Applications: The more a borrower has applied for credit in the last 12 months, the more adverse effect it will have on his credit score. 10% weightage.

Always check for your free credit score government sponsored number so that you have a better idea of your financial standing with the lenders.



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