Maintaining a high credit score

Getting a Loan is a very useful method for reaching goals you may not otherwise be able to or will allow you to reach them quicker. Whether it is buying a house, new business opportunities, and many more. They also give individuals a safety cushion against possible bankruptcy, as long as they act wisely. Therefore, keeping your credit score high is of utmost importance for you. This relays, to any potential loaner, just how trustworthy you are. The higher your credit score, the higher a chance of getting a large loan, or getting a loan at all.

Without it, many opportunities may become unavailable to you, and you may have trouble when nearing bankruptcy. It affects more than just your lending, however. Anyone requiring a deposit from you will check your score, and is likely to adjust the deposit higher if you have a low score. Finally, it also gives you more options when it comes to using credit cards.

Credit card options

Credit cards are, of course, an incredibly powerful tool with all sorts of benefits. If one is in low on funds, and needs a quick loan, credit cards are mighty handy. What’s more, most banks offer all sorts of benefits to credit card users, as their use is quite beneficial to such institutions. Of course, there are some situations where you may not be able to pay back your loan, but for the most part credit cards are quite beneficial. The more options you have with your credit card via your credit score, the better your future opportunities.

Even if your score is currently quite low, you should still be able to raise it with some diligent work on your part. Therefore, in this article, we want to relay to how credit scores work and you a number of ways to ensure that your credit score remains high.

A general guide on your credit score

A credit score is a number that tells a potential loaner of your trustworthiness. There are several companies that calculate this, but the most prominent among them is FICO and VantageScore. Their calculations give a number ranging from 300 to 850. Your number will be within this range, but of course, the higher it is the better. For FICO, the numbers can be grouped in the following way:

300 to 579 indicates a poor reputation,

580 to 669 is average,

670 to 739 is good,

740 to 799 is very good,

800 to 850 is exceptional.

The VantageScore system differs from this slightly:

300 to 499 is very poor,

500 to 600 is poor,

601 to 660 is average,

661 to 780 is good,

781 to 850 is exceptional.

The difference is not great but you will note some differences. For one, the VantageScore has a poor and very poor category, and the average range is also somewhat higher. VantageScore also has a lower bound for exceptional ratings, so their average range is generally narrower. They both emphasise the importance of different things to different degrees, but loaners generally trust both quite well.

Not every loan provider is going to require the same score, and their requirements will change with how much you are requesting from them. Their perceptions may differ from official FICO or VantageScore ratings. So, for example, lenders tend to believe scores below 640 to indicate a subprime borrower. A score above 700 tends to indicate a reliable borrower to them. If you do fall within the subprime range, lenders may still be willing to give you a loan, but at some costs. They could require shorter loan times, or they could require having a co-signer (someone to help pay off the debt if you are not able).

Relevant factors for your credit score

There are a number of factors that can affect your credit score. All of these factors have to do with how trustworthy you are as a borrower and your past history of behaviour. Your credit score is just a way to condense all the available information on you to a small, easily digestible number. The companies consider your payment history, the total amount you owe, the length of your credit history, the types of credit you took, any new you have.

So, what can you do to keep your credit score high?

First of all, the most immediately obvious factor is paying your loan. Do not default on loans, and try as you might to pay at all the required times. The more consistent you are with your payments back, the higher your score. If you maintain consistent payment for half a year, it can make a significant different to your score. Slipping up on a payment once in a while can be forgiven, it is the overall pattern that lenders are interested in. If you do miss the set date, make sure you pay that sum as soon as possible.

Generally, though, the longer your credit history is, the better. If you manage to have a history of loaning for 7 years, most lenders give you consider you. Even if you have a perfect history but have not reached 7 years, you may struggle. Therefore, it is best to start borrowing somewhat early, through credit card loans, to make sure you have the minimum lending duration.

Try to diversify your credit use. Loaners like to see a client with a lot of experience with paying loans in many areas. Open many credit accounts for many different uses, mortgages, credit cards, and so on.

Credit cards

You can also increase your credit. The more credit you have available to you, the higher your score goes up. As long as your past history shows reliability, you should be able to ask for higher credit with your credit cardholder. However, just because you have more credit available does not mean you should use it all.

Finally, whatever you do, do not close a credit card account. If you are not currently using a credit card account, that does not mean you should be closing it. This will have a negative effect on your credit score, unfortunately. This remains true even if you have made all necessary payments on said card, and do not need to make any extra payments. It would be best if you set aside the cards where you will not use them, for now. They should not have any negative effect on you if you leave them be. They could still come in handy under difficult situations in the future.