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Four Most Important Things You Know About Your Credit Score

What is a credit score and how do I get one?

A credit score is a number that ranges from 300 to 850 and represents a person’s creditworthiness. A borrower’s credit score improves the way he or she appears to potential lenders. A credit score is calculated using information from your credit history, such as the number of accounts you have open, the total amount of debt you owe, and your repayment history, among other things. Credit scores are used by lenders to assess the likelihood of a borrower repaying a loan on time.

Here are four things you should know about establishing and maintaining a good credit score:

  1. Your credit score can influence whether you are approved for a loan. When it comes to selecting whether to accept you for a loan, whether it’s for a car, a home, or personal usage, banks and lenders look at your credit score. It’s also a consideration when applying for a credit card. Your credit score also influences the interest rates you pay. Because lenders generally charge higher interest rates to individuals they consider riskier, having a low credit score might cost you money. A good credit score, on the other hand, can save you a lot of money because you’ll be more likely to get the best interest rates and you can check cibil score free by pan card.
  2. Your credit score is based on the information in your credit reports. You have one credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion. The information in these reports is used to determine your credit score. You’ll find identity information (such as current and prior addresses) as well as your credit history (such as payments made on student loans and credit cards in your name). It is your responsibility to correct inaccuracies. It’s critical that the information on your credit reports is correct. It’s your obligation to correct any problems you find, such as an account that isn’t yours or a late payment that you know you made on time.

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Your credit score is available for free. A growing number of credit card companies (such as Discover and Chase) are providing free credit ratings to their customers. 

  1. Your credit score is determined by several variables. The following factors influence FICO scores, which are given in order of importance:
  • Payment history accounts for 35% of the total. This one is straightforward. Simply make timely payments on your loans and credit card obligations.
  • Amounts owing account for 30% of the total. This has something to do with your credit utilization ratio. Essentially, you don’t want to use a large portion of your total credit limit. Instead of maxing up your credit card, limit your spending to no more than 30% of your credit limit.
  • Credit history length accounts for 15% of the total. In general, the more credit you’ve used, the better.
  • Credit mix accounts for 10% of the total. It’s a good idea to have a mix of accounts, including revolving debt (such as credit cards) and instalment loans.
  1. Surprisingly, a lot of things have no bearing on your credit score. Your credit score is determined solely by the information contained in your credit reports, which has a limited reach. It solely considers your track record of repaying money you committed to repay. Lenders, on the other hand, frequently examine other factors when assessing you. Your income, alma mater, or history of paying bills on time, for example, are not listed on your credit reports. You have many credit scores. Fair Isaac Corp.’s FICO scores are used by the great majority of lenders. There are dozens of different versions of these scores, so the credit score you see may or may not be the same as the one lender are looking at. Credit checks are possible for employers and landlords. Be aware that when you apply for a job, an apartment, or a new iPhone from Verizon, your credit may be considered. Employers must ask for your permission to check your credit, and they must inform you if they decide not to hire you based on this information. Landlords aren’t obligated to obtain your consent, but they must notify you if they refuse to rent to you or change the terms based on your credit.

Conclusion:

Your credit score is a single figure that has the potential to cost or save you a lot of money over the course of your life. You can get lower interest rates if you have a good credit score, which means you will pay less for whatever line of credit you take up. However, it is up to you, the borrower, to ensure that your credit remains healthy so that you have additional borrowing options if you need them.

Read also: What Is the Benefit of IDFC Loan Payment Online?

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