Credit score affects numerous financial decisions made in your adult life. If you want a credit card, a house or car loan and even a job, your credit score is influential in achieving these. A credit bureau maintains details of your credit history that is then available to other financial institutions to help them make a decision on offering you a loan or credit card. There are 3 major credit bureaus where you can obtain your credit score by applying for a free annual report, Experian, TransUnion, Equifaz. You can check online for contact information.
Understanding Credit Scores
A credit score is the way the lenders assess your eligibility for credit so the higher your score the better financial risk you present. The scores in use are normally between 350 (low) to 850 (excellent) the credit bureau works out your credit score by various methods that includes:
- Payment history – this has a major impact on your score.
- Amount owed – this is a ratio of the amount owed to the credit borrowed.
- Length of credit history – how long you have used credit.
- Credit Type – loans, credit cards, mortgages
- Applications for new credit – who accepts your application and refused it.
How to improve your credit score is the most important question you can ask and the answer to the question is very clear:
- Paying on time and the exact amount is the primary consideration. Not doing so is automatically defaulting and lowers your score.
- Paying full monthly amounts improves your score.
- Use your credit cards wisely; keep balances below 50% of your credit limit.
- Do not exceed you credit limit.
- Do not apply for numerous loans or credit cards.
- Always try to pay more than the minimum amount on your credit cards each month, even if you cannot pay in full.
- Try not to use the maximum amount of credit you have.
- Do not move your loans around; pay one off before applying for other loans.
When looking how to improve your credit score you have to remember it takes time and what you need to improve is your credit history, how the institutions that decided your credit score see you. Good spending behavior, being responsible in your spending and paying habits and taking responsibility for your credit score are essential. Only you can make the necessary adjustments to improve your score. Educate yourself, be sensible and check out your credit report regularly to ensure it is accurate and this is worth saying again; pay on time, even a day late can affect your score.
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