Excellent Credit Score Explained
A credit score is nothing but your position in the debt scale. The higher you score the better will be your prospect of obtaining a loan. With an excellent score, you will be graded as someone who is most likely to pay off your debt amount. Typically credit scores range between 350 to 800. If your credit score is above 800, then you have an excellent credit score. For most people, the credit score ranges somewhere between 660-750. A credit score above 700 is known to be a good score.
FICO has used certain factors to determine the credit score for a person or an organization. The factors that help in determining credit scores are the following.
Payment history – A lot depends on whether or not you miss on your payment schedule. It is 35% of your credit score. A missed credit card payment is categorized as more severe than a missed loan repayment. Not missing out on your loan payments help to get your credit score to a much better position.
Credit utilization – The more you borrow on your credit card makes your credit score look poor. It comprises 30% of the total credit score.
Length of credit history – It is the duration of time when a loan had been taken, and consideration of last repayments are done.
New credit – Simultaneous involvement with too many credit outlets also reflects badly on your credit score as it points to a financial crisis that you might be undergoing.
Credit mix – When a borrower has a mix of varying credit options it points out the fact that they can handle debt responsibly and pay off debt systematically. This helps to improve your credit score to some extent.
To increase your credit score try the following options.
Analyze your credit score – You can get your credit score done for free by TransUnion, Equifax, Experian. After you get your score cross match with each, in case of any discrepancy, pint it out to the right authority. Analyze your score and look for options to improve it.
Pay your debts regularly – There is nothing like making timely payment on your debts. It improves your credit score dramatically. Give priority to your active accounts over any written off account. You might feel pressurized by collection agencies, yet you should consider paying off active loan accounts first.
Do not max out – Keep your credit card use to the minimum. Perhaps less than 10%. It depends on your ability to repay.
Do not misuse resources – People often tend to borrow money to repay a loan or credit card dues. It does not help your financial condition. Borrowing money from any uncertified or unlicensed lender can only cause future trouble for you even though you might feel, it just improved your credit score.
To improve your credit score, try utilizing 30% of your available limit and paying off 20% of all outstanding dues. It will help you maintain a good credit score. Also, go through your credit report in details, there are many times too many errors in the report itself. Keep track of your credit report and check them regularly for any discrepancies.
If you have an excellent credit score, you not only sleep better, but you also can utilize your finances to the best of its potential. More and more financing options become available to you as with time your financing needs start to grow. You will have better repayment options in terms of tenure and rates available to you. With an excellent credit score, you also get access to premium credit cards as well. Most importantly choose your credit card with the utmost care. Evaluate all details and your own financial health, only then you can find a credit card that works best for you.