What’s a Credit Score?
A credit score is a three-digit number that represents your creditworthiness. Lenders, such as banks or credit card companies, use it to determine how likely you are to repay a loan.
What You Need to Know :
- Credit scores range from 300 to 850.
- They reflect your creditworthiness.
- A credit score helps lenders decide if they’ll approve credit and on what terms.
- The higher your score, the better deals you will get when taking out a loan.
What does a good credit score look like?
This model varies depending on the credit agency and serves as a general framework.
How is your Credit Score calculated?
Factors that determine your Score:
- Payment History (35%): Your history of paying bills on time is the most significant factor.
- Credit Utilization (30%): The ratio of credit you’re using compared to your available credit. Keeping it below 30% is ideal.
- Credit History Length (15%): The longer your credit history, the better, as it shows responsible credit management.
- New Credit (10%): Frequent credit applications can lower your score temporarily.
Simple Tips to Improve Credit Rating
1. Pay Your Bills on Time (35%)
Timely payments are the most important factor in your credit score. Set reminders to avoid late payments, as this can have a significant negative impact.
2. Reduce Your Credit Utilization
Keep your credit card usage below 30% of your credit limit.
3. Avoid Opening Too Many New Accounts
Too many credit applications can lower your score. Only apply for credit when necessary and and avoid submitting multiple applications at once.
4. Keep Old Accounts Open
The longer your credit history, the better. Avoid closing old accounts, as they help improve the length of your credit history.
5. Check Your Credit Report Regularly
Make sure there are no mistakes or suspicious activities on your report. If you find any, report them to the credit bureaus to keep them from affecting your score.
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