What is Credit Score?

What is Credit Score?
Written by: Brayden B.

Credit score ranges between 300-850, based on your credit rating it depicts a person's creditworthiness. Credit score can be altered by a certain level of debt and repayment history. The higher a person's credit score the more reliable they are when it comes to repaying loans on time.

How does credit score work?


              300-579    Very poor
              580-669    fair
              670-739    good
              740-799    very good
              800-850    exceptional





Based on how high or low your credit score is, it can actually affect your life in many ways. With a credit score below 640 you are considered to be a subprime borrower. With low credit scores you are actually carrying more risk, due to the risk factor, lending institutions change the interest rate on subprime mortgages to a higher percentage. With low credit scores the lenders also have the power to shorten the repayment term so people with low credit scores can repay their dues on time and better their score.

On the other side of things, if your credit score is above 700 your interest rates are actually going to be lower than if you have a bad credit score. The better your credit score the less risk you have. Good credit score can actually save you money. previously
Stated, a good credit score can lower interest rates which lower the amount of money you are paying for a loan.


How can you improve your credit score?

Checking your credit score online. 
Getting into the habit of checking you credit score online
Can benefit you in many ways. By checking your reports
You can also see which factors are good and which factors are negatively affecting your score. The risk factors can help you understand how to improve your score. If you aren’t keeping a good eye on your credit score, it could drop fast and you wouldn’t even notice. Credit score is like grades, it’s easier to lower your grade than to get it back up.

Payments on time. 
Paying your bills on time is a big factor in keeping your credit score up. Getting in the habit of paying your loans on time is necessary if you’re trying to increase your score. Setting up automatic bill pay and instant alerts when you have bills are a good reminder to pay your bills on time and avoid charges and damages to your credit score.

Lowering your credit utilization ratio  
By adding up all of the available credit on your credit cards and dividing it by the amount you are spending, you can find your credit utilization ratio. Most lenders like to see that ratio below 30% of the available credit.  This tells lenders that you know how to manage your credit well.  For example, you have a total of $5000 of credit available and if you go and charge $2500, then you would have a 50% ratio.  Try to pay that down so you are lower than 30% monthly.

Works Cited

“How to Improve Your Credit Score Fast.” Experian, 16 Apr. 2020, www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/.

Kagan, Julia. “Credit Score.” Investopedia, Investopedia, 9 Apr. 2020, www.investopedia.com/terms/c/credit_score.asp.

Detweiler, Gerri. “Tips for Improving Your Credit: Your Payment History.” Credit.com, 8 Jan. 2020, www.credit.com/credit-reports/tips-for-improving-your-credit-payment-history/.