What is a Good Credit Score?
Your credit history consists of the money you have loaned in your entire existence and the record of your consistency in paying it back.
Skipping payments may affect your score negatively as you would have backtracked from your initial agreement with the service provider regarding your payment plan.
Other factors that contribute to your credit history include the number of years you have had access to credit and how many credit applications you have made within a certain period.
Credit Score Ratings
According to TransUnion a credit score of 681 or above is generally considered good and may result in a borrower receiving a lower interest rate over the life of the loan or debts. Scores greater than 767 are considered excellent. While every creditor defines its own ranges for credit scores, the following score bands are defined for the score:
- Excellent: 767 – 999
- Good: 681 – 766
- Favourable: 614 – 680
- Average: 583 – 613
- Below average: 527 – 582
- Unfavourable: 487 – 526
- Poor: 0 - 486
A poor, unfavourable, or below-average score indicates that you have some work to do to improve your credit risk rating. Improving your credit score will also help you to improve your financial management, your debt situation, and your overall finances.
Building Your Credit Score
If you have no idea where to start with building your credit portfolio or you need advice on how to up your score, then the following options might be what you need to do:
- If you do not have a clothing account, opening just one will not hurt. You will just have to be disciplined and only spend the amount you will be able to pay back within the stipulated timeframe.
- You may also try to apply for a credit card with your existing bank. You can shop around for the best option that will best suit your current financial status.
- If you already have a credit card, you may want to increase your current credit limit but, the trick here is to never spend beyond your means, spend what you will afford to pay back.
- Balance your credits by having a mix of secured and unsecured credit. This can be store accounts, credit card, home loan, service contracts such as cell phone account and so on. This will help establish a strong credit history for you.
Maintaining a Good Record
It takes a whole lot of discipline and maturity to maintain healthy credit. You will have to use all the credit available to you wisely and responsibly so.
You can start by checking your defaults and arrange to settle your bills as defaulting may have a bigger impact on your score than just missing a payment. Always make sure that you pay the full required amount monthly as paying half may affect your credit score.
Avoid applying for many credits at the same time as this is a red flag, it could mean that you might be struggling to maintain the credit you already have. To stay on track with your credit report checks, you can access your monthly report from platforms such as ClearScore and Credit Bureaus for free.
Above everything, learn to survive within your means.
Don’t get yourself into unnecessary debts just to fit in and impress people that don’t even care because, at the end of the day, your accumulated debts will come back to bite you, affecting your overall credit score.
Be cautious of what you apply credit for and have a plan on how you will manage your finances so that all your credits are well taken care of.