What Is a Good Credit Score? A Guide to Improving Your Credit

A good credit score is key to a healthy financial life. Credit scores are used by lenders as a way to determine your borrowing potential. A good credit rating can mean the difference between getting approved for loans and being denied, or obtaining an interest rate that’s more competitive with other borrowers in today’s marketplace . In this guide we will discuss what goes into making up a person’s personal finance score; ways you may be able boost their own ratings (and maintain them over time); as well tips on avoiding common mistakes made when trying to improve ones’ FICO Score! Let’s get started!

What is Good Credit Score

The credit score is a number that reflects the information in your report. This can be used to determine if you’re eligible for loans, mortgages or other financial products based on what’s shown by this single digit assessment of how well-connected with banks and lenders we are as individuals. FICO scores range from 300-850, and the higher your score, the better. A score of 760 or above is considered excellent.

How Credit Score Is Calculated

  • Payment history (35%)- Do you pay your bills on time? Have you ever missed a payment? Are you currently delinquent on any accounts?
  • Amounts owed (30%) – How much debt do you have in relation to your credit limits? This is also known as your “credit utilization ratio.” The lower this number is, the better.
  • Credit history (15%) – How long have you been using credit? The longer you’ve been borrowing and repaying responsibly, the better.
  • Credit mix (15%) – Do you have a mix of different types of credit accounts, such as revolving lines of credit, installment loans, and mortgages? This shows lenders that you can handle different types of debt.

Things you can do to improve your credit score

  • Check your credit report for errors and dispute them with the appropriate agency
  • Pay all of your bills on time
  • Keep your balances low relative to your credit limits
  • Apply for new credit only when necessary
  • Don’t close unused credit card accounts
  • Limit the number of hard inquiries on your credit report

Mistakes To Avoid While Improving Credit Score

  • One of the biggest mistakes is using a “credit repair” or “debt settlement” company. These companies often promise to fix your credit or get rid of your debt for a fee. However, most of these companies are scams. They may tell you to stop paying your bills or even default on your loans in order to settle them for less than you owe. This will ruin your credit and make it hard to get approved for loans in the future.
  • Another mistake people make is trying to open too many new lines of credit at once. This can backfire because it can look like you’re desperate for money and are maxing out your credit cards. It’s best to space out new applications so that it looks like you’re using credit responsibly over time.
  • Don’t fall for “quick-fix” solutions that promise an overnight improvement in your credit score. These are usually scams as well. Improving your credit takes time and effort, but it’s worth it in the long run!

By following these tips, you can improve your credit score and maintain a good rating. Good luck!

 

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