Everybody likes to have a good credit score knowing it will entitle them to favorable credit terms. What actually is a good credit score? You should be happy if you have a score of 700. More than that and you get more concessions from a prospective lender. On the other hand, anything less than 700 is an indication that your loan application will probably end up rejected or approved under unfavorable terms like higher interest rates and a shorter payment period.
Generally, a credit score will range from 350 to 850 as statistically computed by credit bureaus. The computations are based on your credit history. Questions such as your total outstanding debt, credit types, current credits, missed payments, foreclosures, and bankruptcies are of intense interest to bureaus and lenders. They are factors that directly impact what your credit score will be.
Approximately 40% of borrowers belong to the below 700 credit rating group which means that a lot of people cannot take advantage of highly ranked loans like car and housing loans. They do not have reason to despair, however, since they can always take the necessary steps to improve their bad score.
Reducing your outstanding loan balance is a very important step towards improving your rating. Credit cards, particularly those bearing high interest rates, should be given special attention since interest charges and penalties accumulate rather fast. Limit your credit cards to just a couple. Having a lot of them is always a source of temptation. Basically, disciplining yourself to limiting credit purchases to what are essential and within your paying capacity is the key to not getting into a financial mess in the first place.
Negotiate with your biggest creditor for more lenient terms so you can pay off your debts. Request that your credit records be taken off the books temporarily while you work for retiring them permanently. All these steps will help improve your credit standing.
Protect a good score, if you have one already. Most people commit the mistake of opening fresh accounts when they have less than three years of credit history. Eventually more accounts gets you spending more than you earn and eventually an excellent credit rating turns bad.
Credit ratings can be obtained from any of the three credit bureaus – Experian, Equifax, or TransUnion. It will be good to have a comparison, so get a rating from all three. Check entries, there might be errors that make your score lower than you expect. Report identified mistakes and back-up with relevant documentary evidence. You can improve your credit score by just being alert about these things.