Your credit score is a vital indicator of your creditworthiness. The first thing that any lender or financial institution checks when you apply for a credit card or a loan is your credit score. They use it to weigh your financial security to repay the borrowed sum on time. Focusing on maintaining this score should form an essential part of your life. Some noble ways to maintain a satisfactory credit score by paying all your bills on time, frequent credit report checks, paying off a pending debt and maintaining a low credit utilization rate. Try maintaining a credit score below 30% to reap credit score benefits.
Calculation of A Credit Score:
Almost all credit bureaus follow a preferable credit scoring model. It helps them to correctly evaluate and reach an appropriate credit score. Although every person has their own specific credit score, the factors to draw this credit score are the same for all the bureaus. These are as follows:
- History of Payments
- Credit Utilization Rate
- Credit Mix
- Credit History Length
- New Credit
Payment history plays a major role (35%) in the calculation of your credit score. Credit Utilization should be done more strategically to reduce a negative impact (30%) on your credit score. Credit history length (15%) cannot be ignored either. Credit mix and new credit have the least impact (10%) as compared to the other factors.
What do you get to know through a credit score?
A credit score is a perfect way to know about your credit health. With the help of a three-digit credit score, you will get to know about:
- Current Credit Status: Make out your shortcomings focus on reducing such discrepancies
- Avail Premium Loan and Credit Card Offers: A good credit score makes way for the best offers available on loans as well as credit cards
What are the Advantages of a Credit Score?
Possessing a good credit score is a victory in itself. It entails you to advantages that an average citizen with a low credit score can only dream of. You are entitled to several exemplary benefits like:
- Lower Interest and Credit Service Rates:
Want loans or credit cards at a lower interest rate? A good credit score can sure make this possible for you. Whether it is highly significant like a higher loan amount or something as irrelevant as a processing fee. Get to experience it at lower rates than offered to the usual customers
- Probability of Credit and Loan Approval is Heightened
A good or excellent credit score offers you more chances to be approved for a higher loan as well as a higher credit limit.
- Get Credit Cards with the Best Rewards Available
You are also eligible for some outstanding rewards like cash back, credit points on shopping or completing certain tasks, lower interest rates, discount on travel tickets and hotels, and other regularly updated rewards and offers.
- Fulfill the Eligibility Criteria of Pre-Approved Loan
Get access to pre-approved loans. Banks usually offer customers with a good credit score and a genuine credit history a pre-approved loan.
Such valuable offers certainly compel a strategic and knowledgeable person to put two and two together to maintain a good credit score.