Nowadays, it’s so hard to qualify for a loan. There are several requirements that you have to meet in order to be able to ask for yet another loan. What’s more, the majority of people have no clue what a good credit score is. Most of them didn’t even know the fact that a credit score exists.
In any case, this is your chance to learn. A credit score is ranged between 300 and 850 and is calculated on several factors. If you have 850 on your credit score you will be able to ask for any loans, anytime and get them on the spot because it means you are the perfect client.
However, as that is very hard to achieve and we are all humans and make mistakes, a good score starts from 670. Scores that are lower than that will probably have a hard time getting loans.
There are five crucial factors which determine your credit score and they are pretty simple to follow, actually. Read these points carefully so you can have a broad idea of what is good credit score looks like.
1. Payment History (35% of your credit score)
This is one of the most important factors. Do you pay your bills on time? It’s crucial that you do because if you didn’t pay all of your credits on time, you’d have to pay them timely for the next two years in order to have the perfect score.
Did you know that missing a payment by 30-days can reduce your credit score by 20 points? That’s extremely significant if you are looking to make constant loans.
Try not to overextend yourself and say things like “I can pay that tomorrow” because each passing day of lateness are more points deducted from your credit score.
2. Amount Owned (30% of your credit score)
This is basically calculating your credit balance against your high credit limit. For example, if you have a $5,000 credit limit, if you keep your debt below $500 you will be in the 10% range of available credit, which really is great.
Going with the same example of $5,000, you can go ahead and divide it by 10. You’d usually want to pay your balance below this price, in this case, less than $500.
3. Length of Credit Accounts (15% of your score)
The title speaks for itself. The older your credit account is, the better. Our advice is that you keep your credit cards opened, even if you don’t use them anymore, but don’t forget to use them at least once every six months.
Remember, credit accounts with 15-20 year history are more powerful than newly opened accounts.
4. Amount of New Credit Accounts (10% of your score)
Don’t buy too many credit cards at a time because that might raise suspicions for the bank. Try to go with a small line of credit cards and just build from there. Don’t buy, for example, ten credit cards a time.
5. Type of Credit Used (10% of your score)
It’s to your advantage if you have more credit cards of different types because they will add to your score!
This is exactly how your credit score is calculated and remember, a good credit score is between 670 to 850!