A credit score significantly influences a credit provider’s decision to extend credit. It is a number between 0 and 999 that represents a consumer’s creditworthiness.
The higher the score, the greater the likelihood that potential credit providers would consider you for credit. A credit score is determined by a person’s credit history, which includes the number of open accounts, total debt, and repayment history, among other criteria.
Credit issuers use credit ratings to determine the likelihood that borrowers will repay loans on time.
According to TransUnion, a credit score of 681 or above is typically regarded as excellent and may result in a borrower having a reduced interest rate, resulting in less interest paid over the life of the loan or debt.
Scores over 767 are regarded as excellent.
While each creditor establishes its own credit score ranges, the following score bands have been established:
Excellent: 767 – 999
Good: 681 – 766
Favourable: 614 – 680
Average: 583 – 613
Below average: 527 – 582
Unfavourable: 487 – 526
Poor: 0 – 486
A score that is bad, unfavorable, or below average suggests that you need to improve your credit risk rating.
In this post, we discuss the best ways to boost your credit score, making it easier for you to get accepted for a mortgage, auto loan, or any other type of financial help you may need.
By enhancing your credit score, you will also enhance your financial management, debt condition, and general financial status.
- Payments on Account Must be Made Promptly
Consistency with monthly account payments might assist in enhancing one’s credit score.
The level of your credit score is determined by whether you pay the entire amount due or not at all. This will be shown on your credit report, and it will likely have a negative impact on your credit score if you skip a payment or pay late.
Accessing your credit report for free from organizations like ClearScore and African Bank will allow you to monitor your payment history and confirm that your credit score is still favorable.
- Maintain A Positive Credit History
By not utilizing all of your available credit, you can increase your credit score. For example, if you have a credit card or shop account with a R1000 limit, strive to maintain a balance of less than R350.
Attempt to maintain your credit repayments between 20 and 30 percent of your income. This can also assist you avoid defaulting on your payments, since the amount outstanding will be too little to prevent timely payment.
- Avoid Applying for Multiple Credits at Once
An occasional application for credit will not significantly affect your credit score.
However, submitting several credit applications in a short period of time or being denied credit is likely to have a negative influence on your score.
Before applying for a credit product, you may determine your eligibility to restrict the amount of queries on your credit report by carefully reviewing the eligibility requirements.
- Length Of Credit History
The length of time your accounts have been active also plays a significant effect in your credit history.
The majority of creditors want to see that at least one of your credit accounts has been maintained for a number of years. Having an older credit account there is likely to have a beneficial effect on your credit score. If the majority of your credit accounts are new, this might affect your credit score.
Maintaining a healthy variety of credit, including retail accounts, credit cards, house loans, service contracts such as mobile phone services, and so on, is also beneficial to your credit score. This will assist you in establishing a solid credit history.
- Avoid canceling accounts or credit cards
It is recommended not to close a credit card account. If you no longer need the credit, it is preferable to stop using it rather than close the account. Depending on the age and credit limit of a card, closing the account may harm your credit score.
Your credit score is a statistic that may cost or save you a substantial amount of money during your lifetime. A high credit score can result in reduced interest rates, which means that you will pay less for every line of credit you obtain.
You will be designated as a low-risk client; nonetheless, it is your responsibility to maintain a solid credit score so that you have more access to credit approval chances.
Important Credit Tips And Highlights:
Try not to apply for excessive amounts of credit in a short period of time.
Older credit accounts will improve your credit score and make you seem better to lenders.
Always attempt to make a payment, even if it is late; being in default has a greater impact on your credit score than simply missing a payment.
If you see an error on your credit report, contact the credit bureau to dispute the error. This may perhaps protect you from identity theft and help you present yourself to the credit provider in the most favorable way.