What is a Good Credit Score?

Meta description: Is your credit score good enough to keep asking for loans? Find out now!

Nowadays, it's so hard to qualify for a loan. There are several requirements that you have to meet in order to be able to ask for yet another loan. What's more, the majority of people have no clue what a good credit score is. Most of them didn't even know the fact that a credit score exists.

In any case, this is your chance to learn. A credit score is ranged between 300 and 850 and is calculated on several factors. If you have 850 on your credit score you will be able to ask for any loans, anytime and get them on the spot because it means you are the perfect client. 

However, as that is very hard to achieve and we are all humans and make mistakes, a good score starts from 670. Scores that are lower than that will probably have a hard time getting loans.

There are five crucial factors which determine your credit score and they are pretty simple to follow, actually. Read these points carefully so you can have a broad idea of what is good credit score looks like.

1. Payment History (35% of your credit score)

This is one of the most important factors. Do you pay your bills on time? It's crucial that you do because if you didn't pay all of your credits on time, you'd have to pay them timely for the next two years in order to have the perfect score. 

Did you know that missing a payment by 30-days can reduce your credit score by 20 points? That's extremely significant if you are looking to make constant loans.

Try not to overextend yourself and say things like "I can pay that tomorrow" because each passing day of lateness are more points deducted from your credit score.

2. Amount Owned (30% of your credit score)

This is basically calculating your credit balance against your high credit limit. For example, if you have a $5,000 credit limit, if you keep your debt below $500 you will be in the 10% range of available credit, which really is great.

Going with the same example of $5,000, you can go ahead and divide it by 10. You'd usually want to pay your balance below this price, in this case, less than $500. 

3. Length of Credit Accounts (15% of your score)

The title speaks for itself. The older your credit account is, the better. Our advice is that you keep your credit cards opened, even if you don't use them anymore, but don't forget to use them at least once every six months.

Remember, credit accounts with 15-20 year history are more powerful than newly opened accounts.

4. Amount of New Credit Accounts (10% of your score)

Don't buy too many credit cards at a time because that might raise suspicions for the bank. Try to go with a small line of credit cards and just build from there. Don't buy, for example, ten credit cards a time.

5. Type of Credit Used (10% of your score)

It's to your advantage if you have more credit cards of different types because they will add to your score!

This is exactly how your credit score is calculated and remember, a good credit score is between 670 to 850!

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Reasons Not To Pay Taxes With A Credit Card

Everybody must pay taxes to the IRS at the end of the year; unless of course you can prove that you never received any income during that period. Even though paying taxes is a duty for all citizens, there are times when this liability will come knocking when you are not financially prepared. If your returns indicate that you owe money to the government in form of taxes, you must meet this obligation otherwise you may face legal action and in addition, ruin your good credit. When you have maintained a good credit history for a while, your credit card company might increase your limit and this means you can use the card for almost all expenses including paying the taxman. Before you use your credit card to pay tax and ruin what is a good credit rating score, think about;

The money that tax payment processors will deduct from your card to pay themselves is an expense to you. The IRS appoints collectors to act as contact points for people wishing to pay tax through digital means and these appointees are paid by the tax payer. This fee will be deducted from the credit card limit and hence increase the utilization.

You want to be in the good side of the law by paying your taxes promptly but if you use a credit card, it is easy to underpay. Did you know that an underpayment of your taxes accrues interest charged at different rates every quarter? You may be trying to save face by paying your taxes with a convenient credit card to get good credit but what is a good credit rating score can only be achieved by avoiding it completely.

Related Source: Why Paying College Tuition With A Credit Card Is Unwise

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Financial mistakes that finally catch up with us

The current generation of young professionals is exposed to such a fast moving world that time never seems to be a factor that will eventually catch up with us. Many young people are making serious financial mistakes and while it may seem like innocent youthfulness, the effects can be long lasting and catastrophic. If you would like to have a good credit score, these are the things to observe;

Live within your means

Everybody wants a good life and in most cases this comes at an extravagant cost. Many young people are willing to get into debt so as to finance expensive lifestyles and live their dream. There is definitely no harm in that but if you are always in debt; what is a good credit rating score will be quite elusive. Constant debt could at times mean being unable to pay them and it could hurt your credit score because instead of servicing debt, focus is on maintaining a social class.

Go through the fine print

Get information about credit facilities you plan on taking to avoid frustrations and disappointments. Every loan or credit facility has repercussions especially in the event of defaulted payments. The only weapon you have as a consumer taking a loan is the terms and conditions but unfortunately, most people either rush over or do not read them. It can take quite a while to go through everything but if you do not do it, a perfectly good credit score could be at risk.

Every financial mistake made today causes a ripple effect that could be felt for years or even a lifetime. A good credit score might not seem important now but you might need it later. What is a good credit rating score? It is a result of financial discipline.

Related Source: Facebook Can Build or Break Creditworthiness

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Tips on How to Establish Good Credit

Summary: Once you realize you have an understanding of how to establish good credit and can get loan easily, you should be very selective when getting other cards. Having so many lines of credit at a given time could have negative effect on what is good credit score and can get you into big trouble.

In recent times, most credit card companies will avoid considering someone who is yet to understand to establish good credit. One important point is getting a credit card which is a bold step towards knowing how to establish good credit. Now these few tips will help you understand what is good credit and also how to establish good credit which will help you get a loan and also a very low interest rate.

1. Make use of your Card Frequently

Just getting a card and keeping it will not help you understand how to establish good credit. You might think you will save more by not using your card. But the fact is most bureau want to see a constant on-time payment history on your card which will show an understanding of what is good credit.

2. Have a Budget for your credit usage

It is known that in order to get how to establish good credit, you have to constantly use your card. But this doesn’t mean the card should be used in a random manner. There are two ways this could be done. The first will be for an individual to accumulate so much charge which cannot be paid for while the second way is for an individual to stretch the use of the card beyond the limit which is highly frowned upon by the bureaus. Ensure you keep a balance that a far below half of your limit at every point in time.

3. Make timely payments of bills

Beyond just ensuring you can make payments for all the charges you incur, you also have to be prepared to make payments for bills on time. Every bureau wants to be sure that a card holder is responsible and reliable.

4. Don’t get contented with making minimum payments

Every card bill comes with a minim payment which must be made before the due date. While this could be a great way to satisfy your card company, try as much as possible to make payments in full. This will help you determine how to establish good credit and also a great way to avoid paying high interest charges. You can also make use of a credit card calculator to have an idea of the amount required to pay off your card monthly.

5. Work toward upgrading your card

For a first time card user, you might be required to start with a secured card to help understand how to establish good credit. But as soon as it you know what is good credit and have been able to establish good credit, it will be expected that you upgrade you card to get a better rate. You could decide to take this move with your existing card company or shop for a new card company.

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