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How to Get a Better Credit Score

Why Good Credit is so Important

By Andrew ReichekPublished 4 years ago 4 min read
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Boosting your credit score isn't a process that occurs overnight. If you want a higher score be prepared to put in some work. The good news is that it's not rocket science and it is easy to do.

Bad scores don't happen overnight either. Many of us have made bad decisions that lead to this result.

Consumers usually start worrying about their credit after they have been denied a loan or are tired of paying high-interest rates on their cars or credit cards.

A good score can only help you, especially if you need to borrow money. With that being said, let us talk about credit scores. Who is responsible for them and what we can do to make them much better than they are.

You should also know that lenders will use different credit reports to determine what they end up granting you. Sometimes your creditors will only report to one company, while other times they report to all three.

If one of your creditors reports a negative rating to only one of the bureaus, that is to your advantage. Sometimes lenders will throw out the lowest score!

What is a Credit Score

A credit score is a 3 digit number derived from one of the 3 large credit bureaus. The higher the score the better. You probably have heard of these companies that include TransUnion, Equifax, and Experian.

Each one has its algorithm. All of these credit bureaus will use the same scoring range.

  • Equifax: 300-850
  • TransUnion: 300-850
  • Experian: 300-850

Don't try to figure out how these companies arrive at your score. Just know that they use reports and other criteria to determine what 3 digit number you receive.

So What is a Good Score

First of all, once you have a good score, there isn't much upside to getting an even better score.

According to Equifax, good scores usually fall in the range of 670-739. Very good scores will be 740-799. Once you are in this latter segment, you can rest assured that you just need to keep doing what you have been doing. Because you are doing it right.

When it comes to applying for and getting the best credit cards, you will need to have very good credit. These sorts of cards usually give the best perks.

Also if you want to lease a car, you will need to have upper-tier credit. People with bad credit scores cannot lease cars. They are too big of a risk in the eyes of the lender.

What Happens if I Have Bad Credit

If you have bad credit, you will find yourself at a disadvantage. You will be paying more to borrow money and lenders will turn you down. Let's go over some clear cut examples.

You may be turned down for the apartment of your dreams.

Credit card companies may charge you the maximum rates

If you try to take out a mortgage or a car loan, you will pay more than someone who has good credit.

Start Making Payments On-time

Now that you know what good scores are and the disadvantages, let's get into how you can start to mend your score and get it going in the right direction.

Remember that the credit bureaus determine your score by various models and reports. But they all use similar information

Payment history will be one of the most influential factors that affect your score.

If you have a low score, chances are you don't or didn't make on-time payments. Start paying your auto loan and credit cards on-time. Yes, you might not be able to buy that shiny new cell phone or that new pair of designer jeans, but sacrifices must be made to increase your score.

When you start missing credit card payments, you are going to be paying interest. And it isn't cheap. For those of you who carry balances, you will be shocked at what you have to pay. You are going to end up paying a lot to borrow money.

There is a reason why Visa made 5.85 Billion in revenue for the quarter ended March 31, 2020.

How Much do You Owe

The other elephant in the room is the amount of money you owe. If you total the amount of credit card debt and compare that against your total credit card limits, you're going to come up with your credit card utilization rate

Credit Card Utilization Rate: This can also include student loans, mortgages, and other types of debt. Some lender's will mainly focus on your credit cards only.

  • For example, you have $5,000 worth of credit card debt while your brother has $6000. But your brother has a much higher line of credit at $20,000 while yours stands at $10,000
  • Although your brother has more credit card debt, his utilization score is much lower than yours. He may have a higher credit score as a result.

Bottom Line

Bad credit scores will lead you to pay higher interest rates, thus making you pay more money than someone with a higher score

Start making payments on-time. Don't be late. If you simply cannot afford to do this, you will need to find ways to increase your income or cut costs.

Start paying down credit card debt. Just because you have money to put on your credit card doesn't mean you should.

Don't expect a higher credit score overnight

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About the Creator

Andrew Reichek

HI, my name is Andrew and i am in the wholesale real estatwe business. A wholesaler in real estate is a person or company that specializes in purchasing properties at a discounted price and reselling them to other buyers at a bigger price.

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