Credit Score, otherwise called credit rating, is a numerical representation, which depends on a level analysis of a person’s credit files that represents the creditworthiness of an individual. A credit score is a credit report information sourced from Credit bureaus. It is also a key determinant in getting credit.
Banks, and Credit Card companies who are lenders, only need to take a look at your credit file and calculate your credit score (also known as CS for short) to enable them to see the level of risk involved in lending to you.
Thus, your CS matters when you want to get credit. You’ll only be offered credit based on your current CS status. The interest rate of the credit you are offered also depends on your credit score. Thus having a good CS, is something you should work to achieve.
Being able to get a credit card, also depends on the health of your CS. Where you have a robust score, getting a credit card should not be an issue. But where you have a fair, or bad credit score, you may have difficulties getting approved for a credit card. So in this article, we have outlined how the credit score works, the benefits of credit score, the different types of CS as well as how to improve your credit score. This will help you know what to do.
How Credit Score Works
Even though the company you are applying to, determines how your credit score is worked out, there are still some basic procedures, that almost cuts across all bureaus.
Your credit score gets calculated, anytime you apply for credit, like a loan, credit card, mortgage, or even a mobile phone contract. The company you are applying to determines how your score is worked out. Thus, it is different strokes for different folks, when it comes to credit score rating as different companies have different methods, thus your credit rating may vary between them.
A good CS gives you a better chance of being accepted for credit at the best rates. This implies that the higher your CS, the better chances you stand of influencing the following;
- Insurance monthly payments
- Car financing
- Property rentals
- Credit cards, loans and mortgages
- Gas & electricity monthly payments
- Mobile phone contracts.
What is a Good or Average Credit Score?
People always ask this question, “what is good or average CS”? Here, we will be giving an answer to this question, to help you know the category you fall in.
When it comes to CS, there’s no perfect number that can guarantee your approval, since different companies look for different things in their potential customers. This implies, that you may be refused credit by one, and get accepted by another.
On a general note, we consider a good CS to comprise of the following;
- Good: It should be between 881 and 960
- Fair/Average: 721 and 880
The stronger your CS, the easier it is for you to access credit or loans.
How to Check Your CS
You can use the following major credit scoring models, to check your CS.
- FICO Score Range: 300-850
- VantageScore 3.0 Range: 300-850
- VantageScore Scale (versions 1.0 and 2.0): 501-990
- Experian’s PLUS Score: 330-830
- TransUnion New Account Score 2.0: 300-850
- Equifax CS: 280-850.
How to Improve your CS
Once you review your credit information and discover that they are not what you want or thought it should be, you should take the following into consideration to improve your CS. Note, however, that your CS will improve overnight. You’ll have to be patient and cultivate some good credit habits to see it happen.
- Use Secured Credit Cards
- Use a credit repair service
- Make choices that can improve your credit CS
- Avoid things like late payments, liens or bankruptcies.
As you cultivate these good credit habits, and your credit activities get reported to the three credit bureaus, (i.e.), Experian, Equifax and TransUnion on a monthly basis, with the time you’ll notice your CS swinging to live.
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