Credit Score is a three digit number that is assigned to you. This number came after a long mathematical calculation. Some formula has been used to detect your score with the information in your credit report. Your credit report contain a lot of information like; did you pay your bills on time, or made a late payment or did not pay at all, whether you have any loans or not, whether you paid it off and also some other things which affect your creditworthiness. All these information is put into the formula and it generates your credit score. These credits score play an important role when you apply for mortgage or a car loan or credit cards. Your credit score decide your interest rate. If you achieve a high Credit Score then you can avail the lowest interest rates. This score also helps your lender to identify the risk level when they lend you money. On the basis of your score, the lenders can predict your ability to repay the loan on time.
There are various scoring methods available to evaluate your credit score. Among all methods lenders usually follow the FICO (Fair Isaac and Company) scoring method. Maximum banks, lenders, insurers and other businesses use this scoring method and software.
Try to improve your credit score as it has a great impact on your financial status. It’s not too difficult for you to improve your credit score.
Some basic tips to improve your score:
- At first get a copy of your updated credit report. It will help you to detect any wrong information. If you find any incorrect info posted on your, then immediately contact the credit bureau to remove the wrong info. You can easily remove credit report errors by sending a dispute letter. You can find some sample dispute letters on our sample letters section. Once the wrong information is removed from your credit report, your credit score will automatically move up.
- Always pay your bills on the time, because your recent payment history plays a big role in detecting your credit score. If you fail to pay your bills on a time then your score will go down immediately. Therefore paying your bills on time is another good option to improve your credit score.
- You can increase your credit score by paying your outstanding debt and by trying to keep your debt within limit. Proper budget planning helps you to minimize your monthly expenses and you can easily pay off your debts.
- If you close your old account then it may affect your credit score, because closed accounts cut down your total available credit limit. The available credit will be important in calculating your total credit scores.
- Never file bankruptcy as it stays on your credit report for nearly 10 years. Bankruptcy can destroy your credit score. It becomes very difficult to get a loan on a lower interest rate after filing bankruptcy.