Things About Credit Score Everyone Needs To Know

Credit Score: Meaning and Importance

Credit Score is a 3-digit value, which serves as a means to evaluate your creditworthiness. The credit score is evaluated and estimated criteria determined by three Bureaus – Experian, Equifax, and Transunion. From creditworthiness, it is implied that the higher your credit score, the more secure bank feels providing you a loan as higher are the chances of you paying it in the decided time frame. While a low credit score tells about your financial uncertainty and also lowers your chances of getting your loan approved by a bank or any other financial institution.

check credit score

The ways to check the Credit score: 

Once in a year each of the three major bureaus — Equifax, Experian, and TransUnion- has been directed by The Fair Credit Reporting Act (FCRA) gives you a free credit report once in a year if you ask for it. There are a few Banks, Credit Card companies, and credit unions that are ready to help you get a credit report for free. SO, check your credit score carefully.

More details here – 

Criteria for Evaluating the Credit Score::

The five major factors that help you determine the credit score of your account are:

Repayment History accounts make it for 35% of determining your credit score credit Utilization holds 30% of weight in deciding your credit score

Credit History adds to a 15% proportion for the score evaluation. The mix of credit holds 10% importance on the estimation of your credit score. Recent Inquiries also hold the importance of 10% on the result of your credit score.

When Can You expect A Change in Your Credit Score?

You would be surprised that credit score can change within a day and undergoes constant change. As the definition states that these help to estimate and put a reflection on your capacity and financial strength of paying back a loan and hence are a mirror to your creditworthiness. Certain factors can degrade your credit score significantly like missed payment, higher credit utilization, or a recent inquiry. Therefore avoid them, in any case, to have the desired credit score and get loans quickly and in a hassle-free manner.

 

Getting The Right Credit Score :

The credit score you need for the loan you are considering to apply for depends on it. Your credit score must be 750 or above in case you are considering getting a mortgage. On the other hand, a credit score above 800 is considered excellent.

Know what is the advised total credit utilization rate

There only exists misconception of an ideal credit utilization rate that will make or break your credit score, but the reality is that nothing like this exists. 30% or below is generally salutary guideline, and it is considered that the lower credit utilization score makes your chances better of getting a loan. Customers with credit scores of 800 use typically 7% of the credit available to them.

The most important tip: How can you improve your credit score?

Maintaining the right credit score is not only important to get a loan easily but it also is proof of your financial soundness and thus here are the 5 factors that you need to keep a check on since they influence your credit scores.

The very first being the regularity in payments be it your credit card bills or anything. Just do not miss on your payments. They significantly impact your credit score.

Make sure to keep your credit utilization rate to a single digit.

Note that you should never be under hard inquiries and thus protect your credit score from great damage.

Always opt for the option of a mix of debts in the form of Revolving or Instalment.

The most important thing here is being patient. All of the above-stated factors will only work if you put your brain in use by staying vigilant and monitor your credit score significantly.

Read More: How To Improve Your Credit Score: Our Favourite Hacks 

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