credit score

What is good Credit score:How to get it and Factors that Affect Credit Scores

Last Updated on February 11, 2023 by admin

Credit score history is an indication of how you’ve managed debt in the past. A credit score range from score is about 700 or higher on the 300-850 scale commonly used by FICO and VantageScore, though a score of 800 or above on the same range is considered to be excellent.

Having good credit matters because it determines whether you can borrow money and how much you’ll pay in interest to do also help to know if you are qualify for credit card,Housing applications, insurance policy,Mortgages and many more to ascertain your credit worthiness.

If a lender approves your application for loan, a good or excellent credit score can help you qualify for lower interest rates and better terms.

During job application and employment,some employers may ask to run a background screening, which can include a credit check. It’s especially typical for jobs that involve finances or sensitive information.

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How to get a good credit score

There is no rocket science to building a strong credit score since your credit score It tells lenders at a glance how responsibly you use credit. There are a number of simple things you can do to improve your credit worthiness.

1. Pay your loans on time

late payment can do tremendous harm your credit score and it can stay on your credit report for years

2. Only apply for credit that you need

Avoid making several credit applications in a short time frame.If you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively.

3. keep your credit card balance limit

Your credit utilization should be under 30%, and lower. You also may be able to lower utilization by getting a higher credit limit

Read: How to enroll for Wells Fargo Online banking and Mobile App


Factors That Affect Credit Scores

Understanding what factors affect credit scores will helps you plan the most effective way to build your credit or protect it.the following factors may affect your credit scores.

1. Payment history

How well you’ve done making payments on time. FICO says payment history accounts for 35% of your score.Always pay your loans – such as credit cards – and installment loans, mortgages or student loans.

2.Credit utilization

Credit utilization is usually expressed as a percentage of your available credit you’re using compared with how much you have available. people with the best scores tend to have an average credit utilization ratio of less than 6 percent

3. Credit age

The length of time each account has been open and the length of time since the account’s most recent action. But remember, what qualifies as your oldest line of credit depends on what’s being shown in your credit reports.

Longer is better, so keep old accounts open unless there is a compelling reason to close them, such as an annual fee on a card you no longer use.

4. New credit applications

The number of time you’ve applied recently for new credit affect your scores .Each application that causes a hard inquiry on your credit may take a few points off your score.

5. Debt:

How much current unpaid debt you have across all your accounts.

Read: How to apply for Wells Fargo mortgage loan application

How Does FICO View  Credit  score Factors

FICO Scores range from 300 to 850 and good credit score range as 670 to 739,It considers scoring factors in the following order:

1. Payment history: 35%
2. Amounts owed: 30%
3. Length of credit history: 15%
4. Credit mix: 10%
5. New credit: 10%

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How Does VantageScore view  credit score

VantageScore doesn’t give percentages but says credit utilization is extremely influential. Credit mix and experience are highly influential. Payment history is moderately influential. And credit age and new credit are less influential.

VantageScore considers factors in the following order:

1. Total credit usage, balance and available credit: Extremely influential
2. Credit mix and experience: Highly influential
3. Payment history: Moderately influential
4. Age of credit history: Less influential
5. New accounts opened: Less influential

Meet Ogbeide Frank, popularly known as perere, a blogger who loves writing about finance and Tech. He studied Business administration at the Ambrose Alli University Ekpoma and Mobile Communication at Orange College Malaysia .Frank have worked as a banker and consultant in variety of Nigeria agencies

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