The credit score is a number that represents your credit history and your ability to pay debts. This score is used to determine if you can get a loan, a credit card or other financial products, as well as to determine the interest rate that will be charged. Next we will talk about everything you should know about this.
What is the credit score and how is it calculated?
The credit score is a number that reflects a person's credit solvency, that is, their ability to pay their debts in a timely manner. The score is a number that ranges between 300 and 850 points and is based on your credit history.
It is calculated from several factors, such as your backward payments, the amount of debt you have and how long you have had credit. Credit agencies, such as Equifax and Transunion, calculate your score and provide it with the lenders who request it.
Why is it important to have a good score?
A good score can be the difference between obtaining a loan or a credit card with a low interest rate or being completely rejected. The lenders use your credit score to evaluate the risk of lending you money and determining the interest rate they offer you.
The better your score, the better the offers you will receive. In addition, a good score can help you get an apartment, a job or even insurance at a lower price
How to improve your credit score?
There are several ways to improve your credit score. Here we present some useful tips.
Make your payments on time
Backward payments are one of the main reasons why the credit score is reduced. Therefore, it is important to make your payments on time, either from a credit card, loan or any other account.
If you have difficulty making your payments on time, consider configuring automatic payments or establishing reminders to make sure you do not forget any payment date.
Reduce your debts
The amount of debt you have can also affect your score. If you have a lot of debt, consider making additional payments to reduce it. Another strategy is to request an increase in your credit limit, which can reduce your credit use rate and improve your score.
Keep your accounts open
Another factor that affects your score is the length of your credit history. If you have old accounts, do not close, since they can have a positive impact on your score. Instead, be sure to use them regularly and pay the payments on time.
How to know your credit score?
To know what your credit score is, you can get a free annual credit report from the three main credit agencies. You can request online or mail reports, and be sure to verify the information presented in each of them.
In each credit report, you can find your current score and detailed information about your credit accounts, such as cards, loans, and debts. It is important that you carefully review the information presented in each credit report, and that you notify the corresponding agency of any error you find.