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How Is Your Credit Score Calculated?

Maintaining an excellent credit score is essential if you want to pay less on your student loans. But many people don’t realize how your credit score is calculated, and what steps they can do to improve it.

LendKey www.lendkey.com

on 15 April 2015

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Transcript of How Is Your Credit Score Calculated?

Credit Score
One of the key factors in determining your interest rate and loan terms when refinancing your student loan is your credit score.
What Is A Credit Score
Your credit score is a number that tells lenders how reliable you are when it comes to paying back your loans.

The higher the score, the more reliable you appear to lenders.

The lower the score, the more unreliable you appear to lenders.

If you have a high credit score, you are typically rewarded with lower interest rates and better repayment terms, since you’re considered to be more reliable

How Is Your Credit
Score Calculated?

Your credit score can make the difference in potentially $100s in monthly payments.

Maintaining an excellent credit score is essential if you want to pay less on your student loans.
Factors That Contribute
To Your Credit Score
There are 5 main factors that contribute to your credit score, but every credit reporting company does calculate things a little different.
These factors include:
Payment History
Loan Balances
Length of Credit History
Types of Credit
How Much New Credit You’ve Applied For
Payment history: how many times did you make an on-time payment. If you’ve never been late or missed a payment, you probably have a high credit score. However, just missing one payment can significantly lower your score.

Loan balance: how much debt do you currently have. If you are already in a lot of debt, lenders might be scared to loan you more money, because they will be worried about your ability to repay.
Credit Score Factors:
Length of credit history: shows how long you’ve been a responsible borrower. The longer, the better.

Types of credit: having a diverse credit profile is a good thing because it shows lenders that you can manage multiple account types. This means having a credit card, student loan, and maybe a car loan.
How often you’re applying for credit: applying for new credit accounts a lot can raise a red flag to lenders, because they will wonder why you are looking a getting so many new accounts.
Simple Tips To Improve Your Credit Score
You can go to annualcreditreport.com and get a free copy of your credit report every year. Having an inaccurate credit report can seriously harm your credit score.
This is the single biggest factor that impacts your credit score, and it’s also one of the easiest to control. Setup online bill pay, or automate the payments some way, so that you are never late.
3. Keep your loan balances low – or on the decline.
Try to pay off your credit cards in full each month, and with loans (such as student loans or car loans) keep the balances decreasing over time. -
2. Make sure you always make your payments on time.
1. Understand your credit report and make sure it is correct.
LendKey helps consumers save money with lower interest rates by matching them to a network of community lenders that prioritize people over profits.
Credit Score Factors:
Credit Score Factors:
Full transcript