Building back your credit score after some missteps, risk-induced decisions, or mistakes takes time. However, with the right strategy and discipline, it is more than possible. In this PDS blog, we explore the most important variables that impact your credit score, and the best ways to sustainably and consistently improve your credit score over time.
Factors That Determine A Credit Score
The credit scoring system analyzes your credit report information to determine the likelihood of paying current or future debts. Key factors and variables for determining such a score includes:
- Payment History: Making payments on time benefits your credit score more than anything else. One late payment will harm your score.
- Amount Owed: The amount of money you have borrowed also determines your credit score. If you want to improve the score, try paying a high amount when the month ends.
- Length Of Credit History: If you are a new borrower, your score will be lower than that of an experienced credit card holder. It’s perceived that they know how to manage debt.
- Credit Mix: Individuals who can successfully manage various credit types and multiple debts will typically have a higher credit score. The system prefers a mixture of debts, like car loans, mortgages, and personal loans.
- New Credit: If you have a new debt, chances are you will fall behind on your old debts. Your score will take a hit after a new loan, but if you keep up with all the payments, it will rise in a couple of months.
Poor, Fair, Good, Excellent: The Levels of Credit Card Scores
The levels of credit card scores vary depending on score types and creditors. You should find out how to check your credit score to see where you fall. Here is what to expect.
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Excellent: 800-850
While an excellent credit score means you are less likely to fall behind with repayments, the majority of individuals have a credit score deemed as “good.” Most lenders, meanwhile, shy away from borrowers with poor credit scores.
How To Increase Your Credit Score
If you are looking to increase your credit score, the most important thing you can do is pay your debts on time, every time. The combination of consistency and low credit usage are the two most important factors that will improve your score.
Second, diversify your credit types. Instead of taking the same loans repeatedly, consider other types of debt available to you. The mixture and differing types of credit – coupled with paying them off consistently – will naturally improve your score over time. However, try limiting new credit applications – especially in a set amount of time. Only look for a new loan when it’s necessary.
Nonetheless, always be sure to fact-check both credit reports and charges. Inaccurate information in your credit report can lower your score, while fraud should always be diligently checked for. You must dispute any inaccuracies to ensure you get the credit you deserve.
How to Check Your Credit Score
There are various avenues you can use to check your credit score. There are free credit card score websites and bureaus like Experian and TransUnion. When you create an account with such bureaus, you will find out how to check your credit score online. You can also find out from your credit card lender or issuer. Some even have mobile apps, which make it easier to track your score over time.
Summary
Hopefully this quick and succinct rundown has helped you learn a bit more about credit scores, and how to improve yours over time. It may take time to achieve the score you want, but with consistent payments, a low credit usage, and a diverse credit mix, it’s more than achievable.Looking for additional help from debt resolution experts? Contact the team at PDS to take control of your financial future today.
