A credit score is a tool used by lenders. It shows them if you are worthy of receiving a loan or not. If you want to find out more about credit scores and how to improve them, keep reading.
What are credit scores?
Credit scores are ratings attributed by a credit reporting agency. They help your lender determine if you are a reliable payer and if they should give you a loan or not. They also use it to decide the amount of money they will lend you.
How is it calculated?
Your personal and financial information is collected and added to your credit report by the credit reporting agencies. The credit score includes:
- Your personal details
- Your financial history
- Your number of accounts
- What type of credit providers you have used
- Your debt agreements or insolvency agreements
What does your credit rating mean?
Credit scores may vary depending on the credit reporting agencies that calculate them. It is a number between 0 and 1,000. The number rating is like this:
- Excellent – If you have the highest score, it means you are considered very financially responsible. You make your payments early and you’re unlikely to harm your score
- Very good – If you have a very good score, you’re considered generally responsible. You make your payments on time and you are unlikely to harm your credit score
- Good – Having a good score means you’re a little above the average category. You are less likely to harm your score
- Average – Having an average score means you’re likely to harm your credit score in the next 12 months
- Below average – If you’re below average, it means you have a really bad financial history and you’re more likely to harm your score in the next year.
Where can you find out your credit score for free?
There are many online providers that can help you calculate your credit score. However, it is better to check more websites because the results may vary depending on the provider. The score may also change every month. Some of the online providers you can get your free credit score from are:
· Finder
· Credit Simple
· Creditsavvy
· Getcreditscore
How can you get a good credit score?
Your credit score can change over time. Improving it has many benefits because it can be easier for you to receive a form of financing. Here are some ways to improve your credit score:
- Always make your payments on time. The payment history is a very influential factor in your score.
- Check your credit score for errors. Also, identity theft can quickly affect your score, so make sure you take action to solve your problem. Send a message to the credit bureaus (Experian, Equifax and Dun and Bradstreet) to fix the problem as soon as possible.
- Lower your credit card limits.
Final thoughts
Credit scores are very important for your lenders to decide whether to give you money or not. However, building a good credit score takes patience and you need to maintain it on a regular basis. So, make sure to always make your payments on time and avoid spending more money than you have.
