To many a credit score, might just be a number. However, this mere number has a significant role to play in your borrowing abilities. Credit score is a figure that defines your credit worthiness. The higher the credit score, the better it is. A high credit score means that the person taking a loan will be able to repay it faster.

It is essential to have a good credit score, as individuals with good credit scores are able to procure loans faster. A good credit score provides a sense of security to the lenders that their loans will be repaid.

As per a recent research, there are only 11 out of 100 people who have a high credit score of 800. It must be noted that 800 is an excellent credit score. 28% of the population has a credit score that ranges between 750 and 799. The rest of the populace has a credit score that is below than 700.

Now you would obviously want to know how this credit score is calculated. There are various factors that are taken into account to derive at this figure. Let us know what these factors are.

Payment history. 35% of your total credit score rests on your payment history. This factor takes into account whether or not you have paid your past loans on time or not. Thus, it becomes important that you repay your loans on time in order to have a good credit score.

Current liabilities. Current liabilities refer to the amount that you currently owe to various creditors. This will include all the loans that you have at present. This factor has a 30% say in your credit score.

Credit tenure. Put in simple words, this refers to the time for which your credit has been due. Has your credit been due for the past one year, two years, five years or even longer? 15% of your credit score depends upon this factor. The shorter your credit tenure, the better it is.

Last credit application. When was the last time that you had applied for a credit loan? Did you apply for a credit loan just few months back? Or it has been years since you took the last loan? This factor takes into account the time when you opened you last line of credit. Last credit application has a 10% say in determining your overall credit score.

Loan type. What is the kind of loan that you have undertaken at present? Is it an installment loan or a revolving loan? This will also be considered when your credit score is evaluated.

While these are some of the mist common factors that are taken into account while calculating credit score, there may be slight differences. Apart from these factors, various other factors that are taken into account to calculate your credit score include control of debt, stability, re-aging, utilization, credit inquiries and various others.

Keep these factors in mind and try to manage a good credit score for yourself.

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