On a basic level, a credit score is like a report card. Each purchase you make on credit affects a 3-digit score set between 300 and 900. The higher your score, the better your financial reputation.
So, what is a FICO or Beacon report? Those are just other names for your credit score. The bottom line is that any and all financial lenders base their decisions off of this all-important score. The way they view credit scores is as follows:
300-575 = ‘poor’
576-629 = ‘fair’
630-679 = ‘good’
680-750 = ‘excellent’
750-900 = top rating
It is very important that you know what your credit score is and that you understand your credit score. Some people may believe they have a good credit score, but one un-paid bill can put you in a deficit that if not acted upon, can be very hard to dig yourself out of.
As I said, it’s important to know what your credit score is but you also need to be aware that any inquiry into your history—for any reason—creates a note on your credit report. Therefore, keep new credit applications at a minimum so you don’t unnecessarily impact your credit score this way.
If you want to raise your credit score, the main factors that will influence your credit score are:
Payment history. It makes sense that if you pay your bills on time, your ‘report card’ grades are better (i.e. your credit score goes up). Conversely, if you rarely pay on time, don’t expect your credit score to rise.
Credit history. Lenders feel good about extending loans to those who are good risks. If you have multiple on-time loans or past success with credit, you’ve been establishing a good credit history.
Outstanding debts. Any balances you carry that are 30 percent of your total limit (or below) are acceptable debt amounts. However, if you regularly carry a balance in excess of 50 per cent, you’ll be viewed as an unacceptable risk by most lenders.
If you have a low credit score and are struggling with debt, consider setting up a free, no-obligation consultation with one of our licensed insolvency trustees. We are here to help!
