Credit scores are mathematical assessments of an individual’s creditworthiness. It takes into account our current and past credit history. Your ability to get credit from lenders depends on your credit score or credit rating. It will also determine how much interest you will pay on loans, whether you can get a job or not especially in the financial services sector and whether you can open a bank account
The rating is a numerical value arrived at by taking into consideration your financial dealings within the last six years like loans, loan defaults, employment history, and credit inquiries.
You can get your credit score for free from reference bureaus such asExperian, Equifax, and Call credit. The reference bureaus get Information on you from banks, companies, credit card companies among others. They will report on what you owe, how good you are with payments, defaults among other variables.
A credit score of above 650, depending on the rating used, is very good while scores below 620 are not good.
What is a good credit score?
The higher the numerical value you have, the better your credit rating although it may vary from lender to lender. Lenders consider those with high credit ratings low risk and can to access loans easily. Those with low ratings are high risk and are usually not able to get loans or mortgage facilities from banks. They may, however, get Bad Credit Loans from some lenders but will have to pay higher than normal interest rates.
Credit scores can be personal relating to an individual’s creditworthiness, or commercial that deals with businesses. It provides information that allows the lender to gauge how financially stable a business is and whether it can sustain a loan. The score depends on a credit report that looks at information such as credit obligation, legal filing, bankruptcies, size of operation, and the number of years in operation amongst others.
Ways to Improve Your Credit Score
You cannot change your credit rating without changing your financial behavior. You have to make sure that you are building positive credit behavior. The simplest way is to make sure that you pay your bills on time. Pay your mortgage, rent and credit card payments on time every single month.
Do not overspend or max out your credit cards. Try to limit your spending to what you can afford. If you can, do away with credit cards, you can keep one or two for emergencies but fight the credit card temptation, it can make you spend money that you have no business spending.
Avoid applying for too much credit. Those who take frequent small loans get multiple inquiries on their credit history.
Check your credit reports and query any misinformation as these can reflect negatively on your credit score and remains on your report for a long time. Even if you remedy the situation by for instance making the required payments, it will still appear on your report for up to 7 years.
A good credit score can open doors for you whether at an individual or commercial level. Ensure your credit rating is always good, check your reports and make the necessary adjustments.