In today’s society, if you want to buy any big-ticket item, you need good credit. Example of these things are houses, cars and any other item requires payments for over a year. Your credit score lets lenders know how likely you are to pay them back on time. This is not the only use for it, depending on your actual score, will determine the interest on the said purchase. The better your score, the less interest you will pay and vice versa with a poor score. You can even be denied financing if your credit it too low. But, how does credit scores work and how can you achieve a high credit score?
Let’s break down how your credit score is decided. There are four different categories that make up your credit score and some weigh heavier than others. Here is a quick break down of these categories.
- Payment History makes up the largest factor out of all the four. Lenders take a hard look at an individual’s payment history, to see if you have a history of paying on time or not. So, if you have never missed a payment, you will get a good boost from this category.
- Next is your outstanding debt. If you have a tendency to keep your cards at their limits, you can do serious damage to your credit. This tells lenders ta=hat you are barely holding on financially. Which can make lenders uneasy.
- Length of credit, the longer you have had credit, the more information there is on you. Which can paint a better picture of you to a lender.
- Types of credit that you have had is the last factor. Having debt to a wide variety of things, like cars or small loans. Can show case the experience you have with dealing with different kind of credit and make you more appealing to new types of credit.
This information is great to help beginners, but what happens if I want to raise my credit? Well that becomes a bit trickier then just keeping good credit. Most of the time, you can fix your credit over time and proper financial habits. But, if you want to repair your credit score fast there are services that you can hire to help raise it. Though keep in mind these services do take some time. Another big issue to worry about are fraudulent services that don’t help you and take your money. The best way to weed these companies out, are to research them and find customer and professional feedback from multiple sources. Companies like these will promise you that they can get things removed from your credit. Which in certain cases that can be true, that is often on some very strict criteria and cannot be just simply removed. Be wary of these kinds of services that promise so much. But, there are services that can help improve your score faster than on your own. Just be mindful when dealing with your credit.
Your credit score is a valuable tool when trying to get a loan. It is important to take care of it and maintain a high score. But, don’t be concern if you have a low score. With proper steps and some professional help, you can restore a credit score to a high value.