A credit score may seem like a combination of any three numbers, but it holds an important place in your financial life. A good credit score can give you so many benefits that you find it hard to count on all your fingers. The better will be your credit score, the better will be your creditworthiness in the market. With a credit score of 800, you can increase the chances of getting loans at a low-interest rate, renting an apartment, and even getting a job. In the financial world, your credit score represents your ability to repay a debt.
Do you know that there are five main elements that impact your credit score? If no is your answer, then let us get the opportunity to satisfy your new curiosity by informing you regarding the factors and their contribution to the calculation of your credit score:
- Payment History ⇢ 35 %
- Amounts Owed ⇢ 30%
- Length of Credit History ⇢ 15%
- New Credit ⇢ 10%
- Credit Used ⇢ 10%
Increasing credit score to 800 is not like taking a walk in the park, but it demands constant efforts and a lot of time to invest. Here, we are providing some tactics on how you can improve and maintain an excellent credit score in the long run:
- Review your credit report: Initiate your credit score building by requesting a copy of your credit report from all the three main bureaus (Experian, Equifax, and TransUnion) and check for errors. If you find errors, inaccurate information, or false accounts, raise a dispute so the same can be corrected or removed so that it won’t impact your score negatively.
- Pay your bills on time: Paying all your bills on time is the easiest thing you can do to improve your credit score. Your payment history contributes up to 35% of the total credit score. Therefore, you must pay all your bills by the end of each month or at the agreed time to boost your score by significant numbers. A 100% payment history can help you to grab a credit score of 800 quickly.
- Credit Utilization Rate (Amounts Owed): Maintaining a 30% or less credit utilization rate can be beneficial for your credit score. If you have a high balance on your credit card, then it can harm your score badly. You can pay off your debts as quick as possible so that it won’t affect your credit score. Maintaining the utilization rate between 1 to 10% can accelerate your credit score improvement process.
- Do not apply for new credit: Whenever you apply for new credit, a hard inquiry is placed on your credit report that has a negative impact on your score. Hard inquiries can fail you in your endeavour of increasing your Credit score to 800 by just some numbers. If you don’t want to take any chance with your credit score, do not apply for new credit, but if in case you have to, then do proper homework to avoid too many credit inquiries.
- Build a long credit history: The longer the credit history, the more will be your score. Your more extended credit history shows that you have good experience in handling credit. The length of credit history contributes up to 15% of your credit score. Therefore, it is crucial that you systematically maintain those accounts that are opened from years and close the ones which are recently opened and are not in use to add more numbers to your score.
- Restrict your liability: Whenever you co-sign a loan agreement with a person, then you also became responsible for the debt. If the other person doesn’t manage the debt well or fails to repay the debt, then it will affect your credit score and harm your financial standing in the market. If you want to increase your score to 800, then you should limit your liability to the extent that it will not harm your score.
As all the factors mentioned above influence your credit scores, it’s high time when you should start to implement them in your behaviour for increasing your score to 800, which will further improve your creditworthiness in the market.