“As a child, a library card takes you to exotic, faraway places. When you are grown up, a credit card does it”. A credit card works in exactly the same way. Credit cards are now an essential part of daily life and one of the most popular payment methods that most people prefer. But do you know what a credit card is, how it works? and How to raise credit score by 200 points?
A credit card is a type of credit facility offered by banks that allows customers to borrow funds within a predetermined credit limit. If you want to know more about credit scores, then you are in the right place.
What is a credit score?
Factors that affect your credit score.
Strategies to raise credit score by 200 points?
What Is A Credit Score?
A credit score is a number from 300 to 850 that represents the customer’s worthiness. The better a borrower seems to potential lenders, the higher their score.
It is based on credit history, total debt levels, payment history, the number of accounts open, and other factors.
There are 3 main credit bureaus,
Factors That Affect Your Credit Score
There are many factors. But here are some of the most common factors that affect your credit score. Read below:
It is the most important factor in credit scoring. One missed payment can harm your credit score. Lenders want to ensure you will pay back your debt on time when they are considering new credit for you. The more consistently you make payments on time, the better your credit score is.
The next most significant aspect affecting your credit scores is your use of credit, particularly as seen by your credit utilization ratio. It ( credit utilization ratio) is calculated by dividing the total revolving credit you are currently using by the total of all your revolving credit limits.
The credit utilization ratio looks at how much of your available credit is utilized by you. Using more than 30 presents of your available credit limit negatively affects creditors.
Credit history length:
The longer your account is open, the more opportunity you have to showcase your ability to repay debt. This includes your oldest credit account, your newest credit account, and the average age of all your accounts. Credit history length makes up 15% of your credit score.
Showing you can handle repaying different types of credit, like car loans, credit cards, and student loans, Mortgages and other credit. Having a healthy credit mix will increase your credit score. Opening new types of accounts can increase your credit score, but do not overextend your spending just to try to increase your credit mix.
10% of your FICO® Score is based on how many new credit accounts you have opened and how many hard credit inquiries lenders conduct when you ask for credit.
These are some factors that affect your credit score. You have to focus on it to increase your credit score.
also read: Bank As A Service Provider
Strategies To Raise Credit Score By 200 Points?
Some strategies may help you know how to raise credit score by 200 points. But the best way to increase your credit score is to practice good credit habits over time. Here are some strategies.
Be a responsible payer:
Making payments on time on your credit cards and loans also demonstrates your reliability as a borrower to lenders. This is the main component for raising your credit score by 200 points. Non-debt responsibilities usually don’t affect your credit score, but ignoring them can result in accounts going into collections, which significantly negatively affects your credit score.
Follow the following tips to make your payments on time
- Make an emergency fund for your monthly expenses.
- Avoid spending more on your credit cards than you have in cash.
- Don’t take out any loans with monthly payments that are hard to repay.
- Always stay within your budget.
- Set up automatic payments for your installments,loans, and credit cards.
Lower your utilization rate:
To increase your credit score, never use more than 30% of the assigned credit limit. Use always less than and equal to 30% of your credit utilization.
One of the best strategies to raise your credit score by 200 points is to reduce your balances. You will notice an increase in your credit score if you get all of your balances low, provided that there are no negative marks on your credit reports, like late payments or delinquencies.
Limit your loan and credit card applications:
It may impact your credit score if you frequently apply for loans and credit cards. If you submit many applications quickly, the lender may be upset. It shows that you are taking on a lot of debt and may fail to repay it later.
Keep the account you already have:
People close their credit accounts after paying off their balances. It is the most common mistake that people often make. When you close a credit account, you have fewer open accounts on your credit report. Many lenders will turn down your credit application if you don’t have enough open accounts. Closing unused credit card accounts decreases the credit you have access to and may impact your credit score.
Quiz: How to raise credit score by 200 points?
1.QUE- Which of the following most influences your credit scores?
A) Getting divorced
B) Having a credit application denied
C) A drop in salary
D) None of the above
2.QUE- Which of the following most influences your credit scores?
A) Types of credit accounts you have
B) Your payment history
C) The amount of credit you are using compared to the total amount available to you
D) The length of your credit history
3.QUE- Your credit scores are calculated using information from:
A) A background check
B) Your friends and neighbors
C) Information in your credit reports
D) Your employer
4.QUE- Which of the following is usually a good generic credit Score?
5.QUE- Does each consumer have just ONE generic credit score?
C. Don’t Know
FAQs: How To Raise Credit Score By 200 Points
Q1- What is a good credit rating score?
ANS- 670 to 739 is a good credit rating score. Ranges vary depending on the credit scoring model, credit scores from 580 to 669 are considered fair. 670 to 739 are considered good. 740 to 799 are considered very good. and 800 and up are considered excellent.
Q2- Is a 1200 credit score good?
ANS- The best-known range of FICO scores is 300 to 850. Anything above 670 is considered to be good. FICO also offers industry-specific FICO scores, like for credit cards and auto loans, which can range from 250 to 900.
Q3- What is a bad credit score?
A credit score of 600 and below is considered to be a bad credit score. And if your credit is low, you may qualify for a loan but the rates may not be favorable. Credit scores between 601 to 669 are considered fair credit scores.