A good credit rating makes your life easier. This number is three-digits and can affect nearly all aspects of your financial life. It makes it easier for you to reach important milestones like buying a home, renting an apartment, or getting a mortgage.
This guide will cover everything you need to learn about credit building, even if your credit history is not perfect.
Learn how to build stellar credit, no matter if you’re a recent high-school graduate or an established creditor later in your life.
1. Good Vs Bad Credit Score
According to FICO, a good FICO score ranges between 670 and 739. FICO considers scores between 580-669 “fair”, and 740-799 “very good.” Anything higher than 800 is considered “exceptional.”
FICO reports that the credit score was 716 in 2021, which is within the good range. Fair Isaac Corp. developed FICO, which is the first credit scoring system. It is based on data about consumers from TransUnion, Equifax, and Experian.
FICO scores are typically used to indicate a consumer’s creditworthiness. They range in value from 300 to 850.
FICO Score 8 is the most commonly used version of FICO scoring model. It ranges between 300 and 850. Lenders will be more cautious with borrowers with lower scores. A score of 669 or less is considered poor credit score. Additionally, scores between 580-669 and 580-669 can be considered fair. Scores below 580 are considered poor credit or bad credit.
Lenders in New York may use different FICO score models for different loan types. A lender might use your FICO Score Auto Score when you apply to an auto loan. This score is between 250 and 900. Higher scores mean less risk.
2. Credit Score Mistakes And Tips To Rebuild Your Credit
Your credit score is an important indicator of your financial health. It’s therefore crucial to have good credit habits in order to build and keep a strong credit history.
It’s important to avoid making credit mistakes. They can hinder your progress and cause damage to your credit score over time. You’ll be able to achieve your credit goals if you are more aware of the factors that impact your credit score, as well as the possible pitfalls.
Credit Mistakes To Avoid
Missing payments: If you are currently paying off debts (such as mortgages or credit card loans) but are often missing payments, you will be causing serious damage to your credit score, as it will show to lenders that you are not reliable.
Missing bill payments: If you are struggling to pay your Orange and Rockland or water bills, this could also lower your credit score rating. If you are struggling to pay your electricity bill each month, you could save money by shopping for electricity providers in New York with the cheapest rates.
Maxing out your credit card: Many people think that using their credit card to its full potential will help your credit score. But, if you are regularly maxing out your credit score, it can hurt your credit rating.
Applying for new credit cards too often: Each time you apply for credit, a new inquiry appears on your credit report. The more inquiries you have, the riskier you look to lenders, which will further harm your credit score.
If your credit score is not as high as you would like it to be, and you are wanting to apply for a loan soon, here are some tips you can use to repair your credit score:
Build your credit score: Having little (or no) credit score can make it very difficult for companies to assess you, which could be making your credit score lower (even if you haven’t made any mistakes). You can start to build your credit score by getting a credit card (and keeping up with payments).
Keep up with payments: Paying your bills and accounts on time is a good way to show lenders that you are a reliable borrower and will therefore be more likely to be offered a loan.
Keep your credit utilization low: your credit utilization is the percentage of your credit limit that you use. Although many people believe that as long as you payoff all of your credit limits, your credit score will not be affected. However, this is not the case. So, you should try to keep your credit utilization as low as possible. For example, if you have a credit limit of $2,000, you should try to spend only 25% of this.
Pay outstanding debt: Before you want to apply for a new loan, you should try to payoff any outstanding debt you may have. This is because banks and other lenders may be unwilling to give you a loan if you already have a lot of debts you haven’t paid off yet. Moreover, it can be incredibly stressful to have debt piling up, so make sure you have paid off as much debt as possible before you start applying for any more loans.
It may take many years to get your credit score up to the level you desire. It may seem daunting to do this. However, you can take steps like checking your credit score frequently, paying your bills on time, keeping your credit card balances low, and avoiding any debt that could cause financial strain. These habits will help you to avoid credit mistakes and build your credit quickly. You’ll enjoy many benefits as you build and maintain a credit history.