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Get your credit score back on track

by | Jan 25, 2023 | Personal Finance

Defined as a number that represents the creditworthiness of a person, a credit score is a measure of the likelihood that a person will be able to pay back a loan or credit card debt. Credit scores are typically used by lenders, such as banks and credit card companies, to determine whether to approve a loan or credit card application, and at what interest rate. Credit scores are also used by landlords and insurance companies to assess risk. The most well-known credit score is the FICO score, which ranges from 300 to 850, with a higher score indicating a lower risk of default. Factors that can affect a person’s credit score include their payment history, credit utilization, length of credit history, and types of credit used.

When you have a low credit score may be denied a loan or may be offered a loan with a higher interest rate. This can make it more difficult and more expensive for them to borrow money, which can make it harder to buy a home, a car, or other major purchases. Credit scores can also affect the cost of other financial products, such as insurance. In some cases, a person with a low credit score may be required to pay a higher premium for their insurance coverage. In short, a credit score is important because it can affect a person’s financial well-being and their ability to achieve financial goals.

With ever increasing interest rates, petrol prices and the overall cost of living many people have found themselves in desperate situations which landed them with a low credit score. Fortunately, it is possible to turn things around and improve your credit score to be able to participate in the credit world in a healthy way. Here are some tips:

 

Pay your bills on time:

Payment history is the most important factor in determining your credit score, so it’s important to pay your bills on time. This includes credit card bills, student loans, and other types of debt.

 

Keep your credit utilization low:

Credit utilization is the amount of credit you’re using compared to the amount of credit available to you. Lenders like to see low credit utilization because it shows that you’re not maxing out your credit cards and that you’re able to manage your debt responsibly.

 

Don’t open too many new credit accounts at once:

Opening too many new credit accounts in a short period of time can hurt your credit score, as it may appear that you’re taking on more debt than you can handle.

 

Check your credit report for errors:

Your credit report is a record of your credit history, and it’s important to make sure that the information it contains is accurate. If you find errors on your credit report, dispute them with the credit bureau.

 

Use a mix of credit types:

Having a mix of different types of credit, such as a mortgage, a car loan, and a credit card, can improve your credit score. This is because it shows that you’re able to manage different types of debt responsibly.

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