A great credit score number is essential to maintain your financial health. You can increase your qualification odds for credit cards and receive some of the best interest rates on various credit products by having a good and excellent credit score.
But, it is not too easy or a thing that may happen overnight. You must consistently practice responsible credit behaviour, like paying bills on time, limiting debt, etc.
It's a great plan to start a credit history early because building a credit history takes time. And also, if you start creating your credit history early, it will work for you when you need it.
Do you want to know – what is a great credit score number? A three-digit number like 300 - 850 is known as a credit score. This range is the result of an analysis of your credit file. For example- Lenders mostly use your credit score to judge your potential credit risk and ability to repay loans.
Credit Score Calculation:
- Payment history: It checks whether you have paid past credit on time or not.
- Amount owed: It is also known as the utilisation rate, as it is the total loan and credit you have used compared to your total credit limit.
- Length of credit history: The time length of your credit.
- New credit: About your new credit accounts and how often you apply for them.
- Credit mix: Like credit cards, finance company accounts, mortgage loans, instalment loans, etc., are the varieties of credit products you may have.
What to know- How to get a great credit score?
Pay your entire bills on time:
To build a great credit score number, two critical factors are keeping your balance low and making payments on time. Another essential factor to consider is payment history. Your credit score highly and directly depends on the factors like if you are paying them on time or late or if you are delaying it month to month.
Avoiding late payment fees, penalty APRs and interest charges is a good idea because, in other cases, if you would not pay it fully and on time, it may result in a balance.
Why you are opening the account, what you will use it for, and how you will pay the balance off are the essential things to consider and plan before you open your credit account. You must set up auto-pay for at least the minimum payment to avoid unnecessary mishaps.
A low utilisation rate must be maintained:
Your credit score will suffer if your balance increases over time. The second most crucial score factor is your utilisation rate and balance-to-limit ratio. You must remember that a low utilisation rate is better for improving and maintaining your great credit score number.
Take advantage of various alerts card issuers set, like when your balance exceeds a specific limit or when you approach your credit limit, to keep track of your credit percentage. You can also call your card issuer and ask them to increase your credit limit if you have no problem paying your total credit balance in a month on time.
Limit on - New Credit Applications:
While building credit, more is not always better. You can negatively impact your credit score by opening multiple accounts simultaneously, which can also look like a greater risk to the lender.
Regardless if you are approved or denied, an inquiry appears on your credit report each time you apply for credit. If you create or apply for multiple cards within a short period, the effect can add up, while one credit inquiry is not likely to hurt your credit score.
If you want to apply or create multiple credit cards, then you must choose to do it after some interval, like after a few months or a year, but not use it to open an account in the same month.
Various other ways to build credit:
You must remember the important thing about building credit is that credit cards are not the only option, as there are various other options.
Apply - Secured card:
There are various other options if you find it hard to get approved for a credit card. Secured cards are built for people looking to build or rebuild credit; you can consider choosing them.
Become - Authorised User:
There is another way - authorised users, to build your credit, as it is also a low-risk way. In this method, you must remember that before adding yourself as an authorised user, you must be sure that the account owner has good credit.
Pay eligible bills to get credit:
You are not out of options if you want to avoid credit cards altogether. In this option, you can get credit by paying your monthly bills like cell phone bills, streaming service bills, etc.