How to Easily Understand Your Credit Score
It is quite unfortunate that some people do not understand the importance of having a good credit score. Credit scores can affect many things while managing your financial life. If you are still unaware of the significance of credit scores, don’t worry. This post explains everything you should know from definition to factors that affect your credit score and much more information to guide you.
What is a Credit Score?
A credit score is a numerical or statistical expression that is an evaluation of a person’s or consumer’s creditworthiness based on his/her credit history. Financial lending firms use it to determine a potential borrower’s ability to repay the debts as owed.
How do You Compare Good/ Bad Credit Scores?
Different financial institutions, such as banks, credit agencies, and lenders set their respective credit scores differently. A particular bank may set specific credit scores for the various products they offer. For instance, you may be given a separate score for mortgage repayment and a different one for card application.
When you are given a higher score, you stand a better chance to be given more credit. Additionally, a higher score qualifies you to earn better interest rates or greater deals when approaching a financial lender to borrow money or take out a mortgage.
How Does ClearScore Rate Your Credit Score?
ClearScore allows you to view your Equifax credit score as well as displays the various scoring systems by different financial lenders. Typically, these scores are ranked from 0-700 – zero being the least score and 700 the highest as analysed below.
0 – 279: Very Poor | 280 – 379: Poor | 380 – 419: Fair | 420 – 465: Good | 465+: Excellent
From the analysis above, you can quickly guess how lenders rate your credit score. ClearScore score ratings, just like any other scores, are usually just a guide. It doesn’t necessarily mean only people with the highest scores always get credits.
What Factors Affects Your Credit Score?
Various factors contribute to an individual’s credit score rating. These factors include:
- Your payment history
- The total amount owed
- The type of credit
- The length of credit yourhistory
- New credit
From the factors listed above, it is essential to understand all of them and how they affect your credit score.
How Can You Improve Your Credit Score?
There are several ways you can manage and build your credit score. First, you need to be highly responsible in managing your debts and finances. You can do this by making timely payments using a small fraction of available credit. Additionally, the easiest way to build your financial credit is to use your credit card. You can use a small percentage monthly and ensure you pay it back in full. This way, your credit card report will reflect responsible credit management and will boost your score.
We hope this brief guide helps everyone to understand what credit scores are all about and how they affect you. Always maintain a good credit score which will help you get access to better credit loans from financial lenders.
What do i need a credit score for?
Credit scores are needed in almost every way of life, from borrowing money to applying for a mortgage. If you do not have a credit score this could affect your chances of being accepted for any form of credit.
Just as having no credit check can affect your chances of getting a mortgage or a loan, having a poor credit history is also likely to act as a red flag to many lenders.
Lenders will typically prefer to lend money to someone who has a squeaky clean credit history, someone that is able to repay their bills on time and has a history of making regular payments in order to pay their debt of.
If you do struggle from a poor credit history and need to borrow money, the best option may be to find a direct lender that offers no credit check payday loans for people with bad credit.