How Good Is My Credit Score?
If you are asking yourself ‘How good is my credit score?’ then it is very likely that you are interested in getting a mortgage or any other kind of credit.
A credit score is one of the most critical figures within the sphere of your financial activity. This measures your credit or the likelihood that you will clear your debts. Employers use credit scores to decide whether to hire you and how much salary to offer you if hired. The higher the score means the better the result.
This made me wonder about the components of a credit score.
Credit scores are derived from the data contained in your credit reports and hence, it is crucial to ensure that you have accurate credit reports. FICO and VantageScore are some of the most well-known credit scores used to determine credit worthiness of a person.
Both of those scoring models take into account five main factors:
Payment history This is one of the larger portions of your score, accounting for approximately 35 percent. It considers issues to do with the payment of bills and whether the payment was done timely or not. The bad thing is that even if you are a few days behind, your score will begin to decrease and this is not very good.
Credit utilization This factor, which contributes to 30 percent of credit scores, involves the proportion of credit that is currently in use. It is suggested that the amount of credit being used should not be more than 30 percent. It is usually expressed in terms of percentage where the lower the figure the better it is for your score.
Length of credit history This is computed for 15 percent to determine how long you’ve had credit and the average age of your credit. There is a switch from the previous accounts which are positive towards this section.
This accounts for 10 percent of your score and refers to the credit card balance, auto loan, mortgage, and any other credit facilities you may have. %fْ
New credit, The last 10 percent relates to how many new credit accounts you have, how many of these credit inquiries were made by lenders who were and evaluating your creditworthiness. Making too many new accounts or inquiries alsocreditworthinessffect on your score.
Credit Score Ranges
Credit reports are scored using FICO or the VantageScore, both of which employ a range of 300-850. In broad terms here is how the scores break down:
800 and above Excellent 740-799 Very good 670-739 Good 580-669 Fair 579 and below Poor
Well, of course, the higher the score the better but some concerns should be discussed. Above 700 is us some concerns should making a loan application with the lenders. If you get a low score then you will apply for more rest or won’t be able to secure the best deal. It is time-consuming to shore up your score, but it is worthwhile to do so.
Checking Your Credit Score
The first way that can be taken to manage your credit score is therefore to find out the amount of your score. According to the law of the United States, the consumer has the right to receive at least one free credit report from each of the three credit reporting agencies Equifax, Experian, and TransUnion within the calendar year from AnnualCreditReport. com. This report does not contain your numeric credit score but let's review the entire credit profile.
To get your full credit retort with ore, consumers have several options:
Some credit cards and bank accounts also offer free credit scores, which get updated monthly. This is where you should log into the account to check. The FICO score and full credit reports can be obtained directly from MyFICO. Com or the FICO official Website. This gives you the details from all the three credit bureaus you need. Another common feature is that there are also a lot of free apps and websites for checking credit scores such as Credit Karma. These scores are often VantageScores scores, but let you have at least an idea about your credit standing. The third and final component of credit management is the regular tracking of the score. It is preferred to focus on every monthly and yearly variation to observe the overall status or likelihood of an improvement or deterioration in the score.
Improving Your Credit Score
If you find your credit score is lower than you would like, there are several strategies you can use to start increasing it:
Settle all bills on time going forward always. One can solve the problem by installing such options as automatic payments. Payment history is one of the most critical factors you will find being considered in the calculations. Lower credit card and other revolving debt balances. Balances under 30 percent of credit limits are a good thing and this has a positive effect on it right away. Do not apply for any form of credit for at least one year to minimize credit checks. This means that if a candidate is faced with many inquiries within a short period, their scores will be low. Tell the creditor to include the details of timely payments in the credit reference list if it is not being done. The positive history which is given as additional can improve your mark. Something you could do include the following: Dispute errors in your credit reports. This means that mistakes in reports are likely to give a negative score on your requested subject. Try to build a positive history by making some purchases on someone’s account for instance making an application for an authorized user or opening a secured credit card. It takes time and serious effort to rebuild credit scores to Very Good or even Excellent status. But it is worth it to get far better loan rates, which would thus save you a lot of money over several years. As your credit score is gradually built up, be careful to check your credit, continue to pay your bills on or before the due date, and decrease credit card balances to improve your credit score.
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