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What Is A Credit Score?
What Is A Credit Score?
A credit score is a number used by lenders to see a person's financial behavior and ability to repay borrowed money. The credit score ranges from 300 to 850, with higher scores indicating more trustworthiness and lower risk for lenders. There are several factors that can affect your credit score
Different Factors That Affect Your Credit Score!
Payment History (35%): Having timely bill payments ( from loans, credit scores, etc.)
Credit Utilizaiton (30%): Refers to the percentage of total available credit that you are using. For example, if you have a credit card limit of $1000 and you currently owe $300, your credit utilizaiton is 300/1000 = 0.30 or 30%. The lower the credit utilization, the better because it suggests the person isn't relying too much on credit
Length of Credit History (15%): Looks at how long your credit accounts have been open. The longer the credit history, the better credit score
Types of Credit Used (10%): There are a variety of credit accounts (credit cards, loans, etc.). The more variety, the better the score
New Credit (10%) : This 10% is decided from new credit accuisitions and new accounts
Credit Score Ranges
Excellent (750 - 850): There is low credit risk so people with this score range gets the best loan terms
Good (700 - 749): There is low risk and good loan terms
Fair (650 - 699): Moderate risk so higher interest rates
Poor ( 600 - 649): Higher risk so harder to get loans
Very Poort ( 300 - 599): Very high risk so loans could get rejected or there are very high interest rates
How To Improve Your Credit Score
Pay bills on time
Keep credit card balances low
Use a mix of credit types
Repay the loans as soon as possible
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