A Complete Beginner’s Guide To Credit Scores
Life can be much pleasant with a good credit score. It could help you achieve your dreams, whether it’s a car or a private apartment. This blog will give you a complete guide to all you need to know about credit scores.
WHAT IS A CREDIT SCORE?
Let’s assume that you need to lend or borrow money from any loan sector, whether it’s for an educational purpose, medical, or personal issue. There would be a time limit to return the borrowed money. If you don’t return on time, it could negatively impact your credit score. Since a credit score predicts how likely you are to pay back on time, a poor credit score could lower the chances of you being granted a loan in the future.
CREDIT SCORE VS CREDIT REPORT
It could seem that both credit score and credit report are on the same page; however, that’s not the case. Although they are closely related, they are pretty different. Let’s see how!
A credit report is a statement which consists of complete information related to a person’s entire credit activity and their current credit activity. However, a Credit score is a three-digit number calculated depending on the information mentioned in the credit report.
IMPROVING YOUR CREDIT SCORE FOR A HOME LOAN
The top 5 main factors affecting the score of your credit are as follows:
- Length of credit history
The length of your credit history is significant in improving your credit score. It will improve more if the history of your credit lengthens.
- Payment history
Not paying your bills on time can become a severe issue for you. You might face various issues, but it can also affect your FICO score (Fair Isaac Corporation) if you avoid paying the bills.
- Credit Mix
Your accounts’ diversity also helps you develop your credit score more. This proves your compatibility regarding handling debts, loans, credit cards, or mortgages.
- Amount owed
Amount owed refers to the total amount of debt you owe compared to your current credit score.
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RANGES OF A GOOD CREDIT SCORE
It falls within 300 to 850, with 300 being very poor and 850 being excellent. A suitable Credit score range varies based on the credit scoring model used, i.e. FICO model.
- A score between 800 and 850 or higher is generally considered excellent credit.
- A score between 670 and 739 is considered good credit.
- Scores between 580 and 669 are fair credit.
- And scores of 300 or 579 below are poor credit.
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FREQUENTLY ASKED QUESTIONS (FAQs)
- What should be my credit score for a home loan?
- You should have a credit score of more than 700 to be eligible for applying for a home loan at low-interest rates.
- How to calculate a credit score for a home loan?
- You can visit your nearest bank or contact them to check your details. You can even check the credit bureau website portal for all details.
- My credit score is 580. Am I eligible for a home loan?
- To be eligible for a home loan, your score should be around 650-700 f you want low-interest rates. However, you may get a home loan with a reduced amount and higher interest rates if you have a lower credit score than required.
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