A credit score is a representation of the creditworthiness and credit history of a person. This number is used by the loan providers to determine whether they are suitable or not. The three-digit number reveals a lot about your credit history, past payment, and debt repayment behavior. So, if you ever have missed payments or have not taken it seriously, you will surely get a bad score.
A credit score is subjected to fluctuations. With credit activities, it can either improve or become worse. The score is a reflection of your activities related to credit and finance so ‘check my credit score’ idea is a great one. It shows how responsible you have handled credit and finance in the past. By chance, if you find a bad credit score don’t be surprised, it is because of your negative financial activities.
What are the ranges of credit scores?
A credit score generally ranges from 300- 900 out of which anything above 650 is considered a good score. If you have a score of less than 650, it indicates you are not good with credit. That makes you vulnerable and restricts loan providers and creditors in approving a loan.
- 750 – 900: It is taken as an excellent score by the loan providers. This score places the ball in your court always. You will always have approvals from the loan providers.
- 650- 749: This is a good range, which helps you get loan approved easily. You may experience little or no problems while getting credit.
- 550- 649: This is an average score, and it indicates that there have been some mistakes in the past related to repayment. You need to start working to improve it.
- 549- 300: Not a promising score and leads to credit disapproval. High chances that your loan and credit requests will not be accepted. The loan providers do not view this score as a good one.
What affects your credit score?
Are you having a credit score of less than 650? Well, chances are you have taken a few negative steps regarding credit management. Find out what all activities have led and can lead to a bad credit score.
- Missed Bill payments: Do you have a record of missed payment? A default payment can be a huge reason behind a bad credit score. Not only missed ones, but even a late payment activity can also lead to a bad credit score. Paying bills on time is not an option if you have taken a debt. You need to pay it on time, rather before time to be on the good books.
- Too many credit accounts: Are you a person relying upon too many credits? Well, credit should be used to meet emergencies and requirements, not daily behavior. If you have too many credit accounts like multiple loan, too many credit cards, and the mortgage you end up with a bad credit score. Try and stop using too many accounts. Focus on the funds you have, rather than borrowing for every small issue. If you get into a habit of borrowing and managing you end up being bankrupt.
- Old credit accounts: If you are having too many short and new credit loan and mortgages that are not a good sign. The loan providers always look for accounts with a long history. If you have maintained a credit account for a long time, showing positive credibility you get a good credit score. Do not start random short tenure and new credit accounts.
- Pay your total bill: If a bill says the total amount due, this means you need to pay the total amount. The moment you pay the minimum balance, you get outstanding which lowers down the credit score. It is not a good sign to have outstanding, because it is not shown as a positive sign in credit. Paying the full bill on time will help you build a good credit score.
- Balance more than credit limit: Remember your credit card shows a column stating the available credit limit and used up the balance. If the available credit limit is much more than the balance you have used it affects your credit score. The idea is, if you are using up the limit, you need to pay to free off the credit limit. The debt and credit limit ratio is seen and that decides your credit score hugely. This is an indication that you are using credit, but not being able to pay back.
- Block the credit cards you don’t use: Do you have credit cards that you don’t use anymore? If you do not block them, they will keep on holding an outstanding balance. An outstanding balance on any of your credit account is not a good sign. If you are not using a particular card, make sure you block it up.
- Experienced Bankruptcy: Having a credit history of bankruptcy, foreclosure or delinquencies can highly impact your credit score negatively. If you have faced a bad fortune then you will have to have it for the next few years. Such negative activity reflects for several years and does not allow any improvement in the credit score for quite some time.
- Too many credit cards: Are you completely dependent on the usage of credit cards? Well, you need to change the habit of acquiring luxury using credit. Credit is not an everyday lifestyle, it is a financial aid taken during emergency or necessity. If you have relied upon credit for some time then that will affect your score. Too many credits cards are not a good idea as it accumulates a lot of unpaid debt. Manage your expense and low down the usage of credit cards that allure you with attractive offers and promotions.
Final Conclusion: Credit is a necessity, not an option to live life. The more you rely on it, the more you end up losing. Various activities hamper your credit history and lead to a disappointing credit score. Check credit score online often and keep track of the fluctuations, while you work on credit management.
