What is a credit score?
A credit score is a 3-digit number (ranging from 300 to 850) that shows you how likely you are to be accepted for credit. It’s based on your credit report, which is a record of how you’ve handled credit in the past.
When you apply for any type of credit, such as credit card or a money loan, lenders will naturally want to know what kind of risk they’d be taking by loaning you the money. In order to make a decision, lenders will ask for a copy of your credit report – and, when they do this, they often buy a credit score that’s based on the information contained in your credit report.
The credit score is a visual representation of the summary of that report
What is a good credit score?
There is no magic number when it comes to your credit score. As we mentioned above, the FICO Scores have a range of 300 to 850. Obviously, the higher the number the lower your risk is as a borrower.
How to improve your credit score?
Let’s get this clear first before we start divining into the credit score world – improving your score is not a sprint race, it is a marathon where everything happens step by step.
There are many things you can do to help improve your score, but it takes time and patience.
Here are some good way to improve your score:
- Register to vote – by registering to vote you make it easier for lenders to verify your identity. Make sure you re-register if you move houses.
- Pay on time – from credit to mortgages, making payments on time is the best way to avoid black marks. It tells lenders that you’re a safe and sensible borrower, and that makes you less of a risk.
- Build up your credit history. If you have little or no credit history it can be difficult for companies to score you which can result in a lower credit score.
- Only borrow what you know you can afford. If you get into trouble with debt, this will show on your credit report and will damage your score.
- Check for errors of fraudulent activity – Before applying for any form of credit, take the time to go through your credit file for any mistakes of fraudulent activity. Incorrect address or any mistakes personal information could impact your chances of being approved.
And last but not least, the more information the lenders can find about you the more reliable you will look. This is why it’s important to start building your credit history early.