FACTORS THAT AFFECT CREDIT SCORE
CIBI Information, Inc. | 09 June 2016
In the Philippines, companies who intend to identify the financial records of loan applicants avail the services of CIBI Information, Inc., also known as CIBI. CIBI is the Philippines’ first credit bureau spanning 33 years of experience.
"CIBI is in partnership with internationally acclaimed and recognized consumer credit score provider that has become the fixture of consumer lending in the US and the world. CIBI aims to provide a National Credit Score inclined to the worldwide standards for the financial growth of every Filipinos.”
- Marlo R. Cruz
Lenders use the credit score to determine the risk of lending money to a borrower, how much they are willing to lend and at what interest rate. The three common types of lenders are credit card companies, auto dealership and mortgage bankers.
Credit score shows the history of financial stability and handling responsible credit management. The higher the score, the better for you. Agencies like CIBI compile these credit scores based on the data in your credit file. A good credit score makes all the difference when you’re trying to buy your first home, purchase a new car – or whatever goal you have.
Factors that affect your credit score is crucial to avoid unnecessary dilemmas in the future. Here’s a few tips you must understand to improve your credit scores.
1. Payment history
This accounts for approximately 35% of your credit score. Late payments on your current and past credit accounts heavily weigh in calculating your score. Other negative factors include: foreclosures, missing payments, and bankruptcy. Establishing or re-establishing a good track record of paying on time have a positive impact on your score. Develop a plant to meet your payoff goal. Make loan payments on time. Get current and stay current.
2. Debt account
Thirty percent of your credit score is based on your debt account. Financial planner Sophia Bera, who wrote the book What You Should Have Learned About Money, But Never Did says, “having lots of available credit but only using a small percentage of it is good for your score. Having a small account of available credit and charging up to the limit – even if you pay off the balance monthly – won’t help your score.”
Consider the amount you owe on specific types of accounts, such as installment loans and credit cards. When you’re close to “maxing out” several credit cards, you may have trouble making payments in the future. If you’ve been using your credit card on multiple shopping sprees and not paying your balance on time, this negatively impact your score. Having a large balance every month in several, if not most, of your credit cards can affect your score. Potential lenders will make the assumption that you are struggling to make ends meet, and using these credit cards as a crutch to get by. Unsolicited credit cards that arrive by mail, or pre-approved card application may be tempting, but these will not help your credit score in the future.
3. Length of credit history
Fifteen percent of your credit score is determined by your credit history. Length of credit history refers to the age of your oldest account, age of your most recent account and the average age of the combined accounts. A long history is helpful, it means you have the financial capacity to sustain your account and your financial behavior. Credit history also reveals your payment patterns. If you have a habit of missing payments or applying for new credit cards, these may take a toll on your credit score. Lenders would rather see you maintain your longest-standing accounts than your history of closing and opening new accounts. It is an indication that you have been able to efficiently manage your credit. If you have no credit history, lenders might consider other factors such as employment history, residence history and bank accounts.
Empowering yourself with financial knowledge means financial success. It’s never too late to understand about your finances especially if you have goals to achieve. Get a head start by learning these factors that agencies, like CIBI, are using to get your credit score. A high credit score is not impossible to achieve if you are fully equipped with information.