What Are Credit Scores & Why Are They Important

What Are Credit Scores & Why Are They Important

In this article, we will be discussing what credit scores are, and some of the reasons why they are important. By definition, credit scores are short numbers usually three digits, assigned to individuals who want to get a mortgage or any other form of credit. Furthermore, mortgage lenders use these short numbers to determine whether or not an individual is eligible to receive a loan.

These scores can range from anywhere between 300-850. However, if your score is on the lower side being 300-579 it may be difficult for lenders to approve your loan. Therefore, make sure your score ranges between 580-850 to give you a better chance of accessing a loan.

Credit is calculated through various factors such as, debt utilization, repayment history on softer loans, types of loans, utility payments etc. Therefore, some factors are more important than others, the most important being repayment history. Most lenders heavily consider your previous repayment history with smaller loans, to determine whether or not you can qualify for larger sums of money.

Here are some ways you can increase your credit score:

  1. Pay utility bills on time or in advance
  2. Work with a credit repair company
  3. Request for credit increase on your credit cards
  4. Analyze your credit report and correct any errors

Now, you may be wondering who is responsible for calculating these scores. In most countries, there are various credit bureaus that can help you calculate your scores. Therefore, do some research on the ones available to you and ask for assistance.

In conclusion, it is very important to maintain a good credit score as it is highly beneficial for your future endeavours. Additionally, good scores can help you purchase a home, a car and other assets that will benefit you and your family.

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