A Good Credit Score: How to achieve it?
‘Why should I maintain a good credit score?’
This might be a question that bothers you constantly or one that you don’t even realize could be the difference between living well and living with your parents.
Whether or not your credit score is good, depends on a few factors, all of which you can control.
The higher the credit score, the better.
A high credit score reflects your integrity as a borrower.
If you have a low credit score, you will find that lenders are rather reluctant to offer their services to you. The simple question the lender is asking is what are the chances I’m going to get my money back. To state that in a different manner, you will find that buying a car, renting an apartment and even registering for a low-rate credit card is almost impossible without a good credit score.
Nevertheless, your credit score can differ according to a number of reasons.
Mostly, it would differ as all the creditors and lenders will not report information about their transactions to the three nationwide credit bureaus: Equifax, Experian, and TransUnion.
Therefore, the creditors and lenders that want to be thorough would employ data from all three credit bureaus for a better understanding of their customers’ past credit behavior.
Moreover, the credit score may differ according to the type of lender.
A person who would sell you a car on the basis of a lease will have different criteria that are used to calculate your credit score than a mortgage lender that is providing you much longer loan commitment.
Well, right now, you might be wondering about ways to improve your credit score.
There are a few simple ways that you can achieve this.
Paying your debts and other bills on time is a guaranteed method of maximizing your credit score. Even if you missed paying bills on time for a particular period of time, the negative impact of it can be reversed by paying your upcoming bills on-time. Even though this would not have an immediate effect on your credit score, it should increase with time. You can also work with your creditors once you have caught up with your bills and request they remove those missed payments. Not a guarantee but this is one method that you can use to address past issues that were a temporary situation.
If you are someone that keeps missing the due dates, it is advisable to schedule payment reminders in order to make the payments on time. Poor credit behavior in the past would not matter much if you have maintained positive credit behavior during recent years.
In addition to late bill-payments, maxed-out credit cards can be identified as a hazard to a good credit score. It is advisable to pay down your credit-card bills until you are using under 30% of your credit limit (revolving credit aka credit cards).
Furthermore, it is important that you reduce the amount of debt you owe. At the same time, it is sensible that you maintain your debt comparatively low, in relation to your income. This would help to ensure you don’t run up credit balances that your current income could not cover.
You should always be vigilant about your credit report and remove any mistakes that might be on it. For example, any late payments that are older than seven years must have been removed from a credit report as it would lower your chances at getting an approval for a credit request. Although the bureaus will try to report accurate information there are still many errors on consumer credit reports. It is your responsibility to review your report and submit a dispute to remove these errors or these items could be hurting your credit score.
An approximate representation of credit scores ranging from bad to excellent is given below.
- Excellent credit: 781 and above
- Good credit: 720-780
- Fair credit: 658-719
- Poor credit: 601-657
- Bad credit: 600 and below.