If there’s a financial lesson that has been hammered to us early on, it would be this: Credit score is important. It can help you land that dream job, get a mortgage, and even drive home the car that you want…but how? The key, really, depends on your credit score range.
Understanding the different credit score ranges are and how they are affected by your financial decisions are crucial in order to achieve a high credit score. Questions such as “Will my payday loans online setback my score? or “Will applying for another credit card help?” will also be hopefully addressed once you achieve a higher understanding of these numbers.
What Is a Credit Score?
Speaking of which, your credit score is a three-number figure, usually between 300 to 850, that is used to determine one’s financial responsibility and capacity to pay. Depending on its range, it will give financial institutions an idea on how diligent you are in making payments and assess the risks they are facing should they decide to grant you a personal loan to start a business, for instance, or to purchase a new car.
How Is It Computed?
There are various scoring models and formulas used to determine one’s credit score but they do consider the same factors:
- Your credit history
- Your current debts
- Your completed debts
- And your payment habits
The Five Credit Score Ranges
There are five credit score ranges.
- This means that your score ranges from 800 to 850. You will almost always get approved for any type of loan with lower interest rates and more flexible payment terms since financial institutions are confident that you are more than capable of repaying them promptly.
- Very Good. This means that your score ranges from 740 to 799. You will get approved of your loans most of the time and enjoy lower interest rates and more flexible payment terms. You’re only a step away from getting an excellent score, so make sure to sett;e any debt on time in order to further improve your range.
- This means that your score ranges from 670 to 739. You will still get approved for loans most of the time, but expect to get average interest rates and less flexible payment terms.
- This means that your score ranges from 580 to 669. You will experience a hard time getting approved for loans and expect higher interest rates and strict payment terms if you do.
- This means that your score ranges from is below 579. You can expect to get denied for most loans since financial institutions will consider you as high-risk.
Tips to Improve Your Credit Score Fast!
But don’t worry, not all hope is lost. Here are some ways to improve your credit score starting today:
- Check your credit report for errors. Even financial institutions make mistakes. The problem is, erroneous entries can significantly setback your credit score for a notch or two. Hence, it is critical to get those inaccurate entries scrubbed as soon as possible. There are credit report clean up companies that offer such services. They are thorough, detailed, and can help process the requirements for those who have really hectic schedules. You can always do it on your own, though, if you want to limit your expenses.
- Start paying off your debt consistently. There are two useful debt payment methods that you can look into: the snowball and the avalanche method. Whatever your chosen method, though, the trick is to do so consistently to prove your financial responsibility.
- Pay your dues on time. Whether it’s a loan payment or a utility bill, being able to pay on time proves that you are doing better in handling your finances, which will then reflect on your credit score later on. Good luck!
Get Latest updates and read more in BFSI News
