A credit score is a representation of your creditworthiness using numbers. The information used to create a credit score is usually gotten from credit bureaus. Credit card companies use this score to have a better understanding of the risk they face. These risks arise when they approve credit cards to you. Credit card issuers always try to reduce the loss they might incur from such lending.
Your credit score helps credit card issuers determine the interest rate they should charge. And also, the credit limit they should place on your credit card. With the score, card issuers know the customers they will earn profit from and the ones which they should avoid.
The higher your credit score is the more likely you will be granted a credit card. As people with a high credit score are said to be more creditworthy. When credit issuers look at the information on your credit report, they can tell of your ability to pay back. For each information which credit card issuers deem as relevant, a point is given. These points all sum up to create your credit score. A card issuer will approve your credit card application if they are satisfied with your points.
Credit Score Ranges 2018
Credit card issuers usually have faith in people who fall within the scores of 700 and above. Whereas, those fall in the range of 550 and below have the issuers doubting their ability to pay back. Different card issuers have their own score range, however, this is an average credit score range;
- Bad – 550 and below
- Poor – 550 to 649
- Fair – 650 to 699
- Good – 700 to 749
- Excellent – 750 and above
If you apply for credit card and your score ranges from 750 and above, you have a better chance of getting good deals. Such deals could be better interest and a higher credit limit than people who apply with lower credit scores.
What Factors Affect Your Credit Score?
Factors which influence your credit score are gotten from your credit report. Credit issuers can get a copy of your credit report from credit bureaus. All you have to do is apply for it. This will help you know what is lowering your credit score and then try to make it better. The credit score factors are;
- Payment History – this tells the card issuer if you pay back the loans you take on time. It counts for most of the point you can possibly score in the rating.
- Total Amount Owed – this tells the card issuers the credit you are has used out of the credit allotted to you. It could also be referred to as credit utilization.
- Length of Credit History – credit issuers are always looking for data in order to weigh the risk properly. So, the longer your credit risk, the better the chance the credit issuer is able to determine your creditworthiness.
- Types of Credit – this tells card issuers the different types of credit you have gotten. It could be a car loan, house loan etc.
- New Credit – this shows how many credit accounts you have and tells the issuer about the recent credit card which you applied for.
These add up to create your score which determines if you get your card. If you would like to know why your score is low, you can request for the card. Having a detailed credit score will help you know areas you need to improve.
How To Increase Credit Score Quickly
- Always remember to pay your credit card bills promptly.
- Try to increase the credit limit on your cards.
- Trying to close your credit account which you no longer have a use for will have an effect on your credit score. Instead, try to cut it up.
- You should also have your credit report to see the factors that bring your credit scores down.
Anyone who wants to own a credit card but has a bad credit can get one. All you must do is learn how to improve your credit score. You must change certain habits of yours if you wish to improve your credit score. A credit score rating of 750 and above will can provide you with low interest when you try to apply for credit cards.
It might take a while before this step shows on your credit score standing but it is a good starting point. You will be allotted more credit if your credit history is good. Also, do not max out the credit limit newly awarded to you. This way you can find a lasting solution to the problem.
How To Fix Your Credit Score
- You can start by paying off the debt which is the smallest.
- Also, try to pay off credit debts which are close to the limit of your credit.
- Another tip is to transfer your balance to a credit card with a low-interest rate.
Fixing a credit score is never easy. It needs a lot of attention as the wrong debt can affect your credit score. And we both don’t want that to happen. This approach to paying off debt will encourage you to pay off more debt. It will also encourage you to be wary of overspending.
If you continue to use your credit card while you are close to the credit limit, you will end up having a maxed-out credit card. This will leave you open to over the limit fees which will negatively affect your credit score.
When carrying out balance transfers, be wary of the fees which are involved. Some companies charge 0% interest rate on balance transfer. These are the kinds you should look out for. Also, if you do not have enough information about the balance transfer of the card issuer, you should call the card issuer.
What Is a Credit Score Used for?
- A credit score is an easy way to determine your creditworthiness.
- To determine the number of late payments you’ve had.
- Also to ensure that you don’t already have too much debt.
- To determine your ability to pay back the debt.
- It is an easy summary of your credit history.
Every lender uses your credit score to know if it’s a good idea to grant you credit. Everyone has a credit history and it is from this credit history that your credit score is generated. So, even if you are a school teacher or a business executive, your credit score shows the lender your ability to repay your creditors.
5 Simple Ways to Get a Credit Score with No Credit History
- Get Yourself a Job.
You must show that you have the ability to pay back your credit balance at the end of each month. And the only way you can show this is if you have a job. Do not use your family or friend’s income on your credit card application.
- Try to Get Pre-Qualified for A Credit Card.
Some credit card issuers allow you to get pre-qualified for a credit card online. It allows you know if there is a credit card suited for you. They usually don’t reflect on your credit history, therefore; they don’t affect your credit score.
- Apply for A Student Card.
As a student, you have a great chance of qualifying for a student card. Being a student, you might be unable to have a high source of income or any credit history. Student cards are designed for you specifically for that reason.
- Apply for A Secured Credit Card.
Secured credit cards are different from your normal credit cards. This is because they require you to make a security deposit. Your credit limit is determined by the how much your security deposit down payment is. Check out our pick of the best-secured credit cards out there at the moment.
- Use A Co-Signer.
A co-signer who co-signs your credit card application. Basically what your doing is you are using the credit score of your co-signer to apply for a credit card. This co-signer could be your parents, spouse or loved ones. In this case the, the credit score of your score co-signer is affected by your actions.