It’s important to understand what a good credit score is, whether you have it or not. You have to know what it is and how it relates to your finances exactly. Depending upon your credit score, financial institutions will immediately see if you are a risk or not and if they should choose to accept your application or not. The score is obtained from the information provided on your credit report.
There are three big credit report bureaus, Experian, Equifax and TransUnion, to which you can go and ask for your credit report. They collect all of the information related to your credits and then provide each section of this report with points, which make up your credit score.
Basically, when you go for a loan application, your lender will ask for your credit report for a quick reference to see how much money you owe. It will also help them see what kind of person you are and if you pay your debt on time.
There are many factors that can determine whether your application will be accepted or denied. Let’s go through only a portion of these factors and understand each and every one.
1. They will see your credit history and how you previously performed in paying your debt or in relation with any credit you have taken out recently.
2. They will look at your payment history where they’ll see if you’re making payment regularly and on time or just paying the bills in a chaotic style.
3. They will look at how much debt you currently owe, which might be the decisive factor for their decision. You have to have NO debt when going for an application.
4. They will look at how long you have had your credit so they can determine whether you deserve their trust and to see if you’re a daily user.
5. They will look at all of your other applications and other accounts you might have. This may reflect good or bad, depending upon the answers on your applications and the debt owed on other accounts.
6. They will definitely look at your experience with credit cards. This means for how long you have your credit and what you do with it and how you use it.
Credit card scores range between 300-850. Lenders see things this way:
– If you have 680 or higher, you’re considered a “Prime Borrower”, which means that you’re not a high risk.
– If you’re below 680, you’re “Sub-Prime Borrower” and you will not get the best interest rate and may even be denied a loan.
Now that you have all this knowledge, you’re ready to go and fix/maintain your awesome credit card score!