A credit score is a numerical figure that depicts the credit worthiness of an individual. The credit score sometimes referred to as a FICO score is used by lenders to judge an individual’s financial health. It is an indication of the risk that you pose to the lender compared to other customers. Credit scores are calculated in a number of ways. The three major credit reporting agencies—TransUnion, Equifax and Experian—use a scale of 300 to 900. A higher score on this scale shows that you pose a lower risk to lenders. Most lenders have set up the minimum credit score that an individual can have to access a loan. Apart from that, credit scores are used by lenders in setting the interest rates. It is important to improve a blemished credit score, as it can deny you a car, home or a personal loan. Below are some things that you can undertake, to improve your credit rating.
1. Credit Report
Most people learn about their credit score when they apply for a loan. It is important to get acquainted with you credit score beforehand, so that you can know if you need to work on it before you go to the lenders. The credit report contains the list of accounts that are lowering your credit score. Get a credit report from the three major credit agencies mentioned above, and determine what accounts are okay, and those that need to be worked on. You can access your credit report online for free from websites such as The AnnualCreditReport.com. You should correct any errors present in the credit report, by providing the right information to the credit agencies, as errors really hurt your credit score. For example, an erroneous late payment can lower your score by 60 to 100 points.
The higher your score, the better your interest rate will be which will result in significant savings. Below are some tips to follow if you want to boost your credit score.