What is considered a good credit score?
Improving your credit score is a good goal to have, especially if you are thinking about applying for a loan....
What’s your number?
A good credit score shows that you have a solid understanding about your personal finances. Your credit score helps you make sense of the financial decisions you make each day. Anyone can request a free credit report from a credit reporting agency in order to know their own score before taking out any rate loans or managing their finances effectively and with maximum safety.
What is a good credit score?
A credit report will tell you what is happening in your community compared to the rest of us – and even though you can get an idea from a credit score, one must be careful not to take it too literally. Different credit bureaus use different ratios for calculating scores, which can fall between 300-900 with higher numbers indicating a better chance of having the best credit history that is more positive than negative.
How does credit work?
Whether it’s purchasing a big-ticket item such as your first car or first flat, getting a student loan, applying for a credit card from your bank, or simply switching to a cellphone plan from something like a pay-as-you-go arrangement, you’ll need to have established credit history to access these financial facilities.
A score in excess of 700 is considered to be a very good score and can go towards helping you gain preferential interest rates on credit cards, loans, mortgages, etc. Your credit report will let you know where many of your weaknesses are and assist you in improving your score.
Understanding a credit report.
A credit report is basically a picture of your financial behaviour reflected in how you handle debt. The report typically includes:
- A credit history with a 2 year record of your accounts you have taken out.
- Your payment history, including any late or skipped payments.
- Court judgments or defaults you may have against you.
How can you build a credit score with no credit?
If you have never borrowed funds in the past, you may find yourself without a credit score. It takes time for financial institutions to gather data about your every move before they can decide whether or not to lend you money. So even if you are in good standing, it is difficult to borrow without a credit score.
If you’re in this situation, you could opt for a prepaid contract. In some cases, opening small clothing accounts may help build a good credit score. Alternatively, you could try and get a credit card with a very low credit limit. While building up your credibility without any previous credit is more challenging, it’s not impossible.
How Long Does It Take to Rebuild Credit?
Typically, it takes about less than three months of good credit behaviour to see a noticeable change in your score. Though it might take some time if the negative information on your report was severe such as being late with bill payments, you could find yourself being approved for a mortgage faster than previously thought possible if everything else is in order.
While it is impossible to put a specific time frame on repairing your credit, you can rest easy knowing that the less negative information you have on your report, the easier it will be for you to repair your credit score.
- Limit the number of credit applications you make: Keep in mind that your credit report reveals how often you’re applying for credit. It may sound strange, but if you apply for a lot of different accounts at once, it might make it look like you’re overextending yourself and struggling to keep up with your existing bills.
- Avoid too much unsecured debt: It's always ideal to go with a guaranteed option when it comes to debt. The most common types of loans are secured loans that you get for your home or car. These loans will almost always be preferable as they don't leave much room for risk and play on certainty. Limit the amount of credit you’re using.
- Repair negative listings: Bad credit happens to the best of us. There is no need to worry, but you do need to take action. Settle these outstanding balances, as soon as possible by paying all that you can afford and make sure you ask your creditor for a proof of settlement so that you can contact each of the relevant credit bureaus and provide them with this confirmation of financial progress.
- Have a repayment plan you can realistically manage: If you're having trouble repaying your debt, try and negotiate a new plan with your lender. There are many options at a consumer's disposal when having debt issues. The debtor could opt for an early payoff of the loan which will allow them to pay it back in full. The debtor may also reduce the repayment amount monthly but extend the life of their loan in order to pay the debt off over a longer period of time without adding additional interest onto their current bill.
How employment can affect your credit score
Lenders will typically take your income into account when evaluating your credit application, so in this way your employment could indirectly affect your ability to get credit. You may also have difficulty acquiring a loan if you're unemployed or one of your existing loans has gone delinquent. As far as credit scores go, the type of work you do is not a factor nor is it relevant whether you were fired from a job at some point in your history.
How long will your credit history last?
Your credit score is like an identity. It's linked with you at almost every point in your financial life and it affects each stage in some way. You're bound to encounter a few ups and downs along the way but as long as you take care of it and monitor it when necessary, you'll discover how convenient a tool it can be when you approach the next step on your financial journey.
It’s important to know what is considered a good credit score and what is considered a bad credit score. The reason for this is that the level of your credit score can have an effect on your finances. If your credit score is low, you will have difficulty qualifying for certain loans, such as a mortgage on a home or car. If your credit score is high, you will have an easier time qualifying for these loans. We hope this post has helped you understand what is considered a good credit score. If you have any other questions about your credit score, please feel free to contact Credit health.