The Guide to Credit Scores for Beginners
A personal credit score is the quintessence of credit history. History is a set of information about a person’s credit behavior and the fulfillment of their obligations. A score is a numerical indicator of the borrower’s integrity, calculated on the basis of this information.
A credit score is a number with a value from 300 to 850 points, and the higher it is, the more likely the borrower will be approved for a loan in the most favorable conditions.
What does a credit score consist of?
A personal credit score takes into account all credit history records. Its value is influenced by:
- experience — how many loans you have taken for the last 10 years;
- a variety of previously taken loans – it is considered positive if the borrower has used different types of loans several times, but an excessive number of them can, on the contrary, lower the credit score;
- timely loan repayment.
Credit score ranges explained
The probability of loan approval directly depends on the value of a personal credit score. A good credit score is a range between 600 and 850, while:
- 600-700 is a good score. This means that the credit history is highly valued, and a person can apply for a loan from any bank under standard conditions, the probability of failure is low;
- 701-850 is an excellent score. People with such indicators can get a large loan at a reduced rate, on more favorable conditions. Also, borrowers with excellent credit scores receive personal loan offers and bonuses from partner banks.
This means that the risk of rejection increases and the loan conditions worsen. You’d better not allow such situations, and if they have occurred – try to increase your credit score.
What gives a high credit score?
When banks ask how responsibly a person has previously fulfilled his or her obligations and considers whether to approve a loan, they check the credit history or credit score.
Clients with a high credit score can get more favorable terms because the bank knows that he or she handled the money responsibly.
Credit Bureau partner banks can offer special offers, bonuses and incentives to borrowers with a good credit score. However, one should remember that the indicator is informational in nature, and the loan is given to the client not by the bureau but by the credit organization.
A high credit score value increases the chances of getting a loan on favorable terms but does not guarantee this since when considering an application, the bank takes into account the following factors in addition to the credit history:
- the level and consistency of the potential borrower’s income;
- what conditions he or she applies for;
- availability of a guarantor;
- level of family income
- availability of collateral, etc.
How to get a good personal credit score?
To have a high credit score, you need to start thinking about it when you taking your first loan so that later you do not need to correct it. To have a good credit score, it is recommended to:
- avoid delays and penalties on loans, non-payment, especially court penalties;
- service your loans responsibly and regularly;
- take a rational approach to taking loans, not to collect too many obligations;
- give preference to reliable lenders with better conditions.
Who should know their credit score and why?
- Potential borrowers who are going to take a loan. A high credit score will not give a full guarantee, but information about it will help you assess the risks and imagine what conditions you can expect;
- Those who are looking for better credit conditions. Banks that cooperate with the Credit Bureau offer special offers, and you can find them out by requesting information about the score. Along with the score, the borrower will get access to additional bonuses and incentives. In addition, if you know your score, you can understand whether to apply for bonuses;
- Those who want to constantly monitor their credit history. If a person is interested in their chances of getting a loan or wants to monitor the state of their credit history more often, it is useful for them to check the credit score more often.
How to get a personal credit score?
You can apply for a personal credit score directly on the website of the National Bureau of Credit Histories, in the personal account of the borrower. To make a request for the first time, you need to:
- register on the official website, set a username and password, create a personal account. All further actions will be carried out through the client’s account;
- confirm the authenticity of your personal information using the public services portal. To do this, you need to have a registered account on the service;
- submit an application in your personal account.
After submitting the request, the credit score will be displayed in your personal account.
How much does it cost to check your credit score?
The request for a personal credit score in the Credit Bureau is available for free without restrictions. At the same time, you should remember that the credit history is legally stored for 10 years from the date of the last record. If during this time you have not taken any actions that affect the credit history, it is deleted, and the calculation of the credit score becomes impossible.
How to improve your credit score?
Good credit scores take time and work.
A number of factors can affect your credit score. First of all, you need to check whether there are any errors in credit history, such as typos in passport data or information about loans. You have already paid off the loan a long time ago, and the information is still not updated…
If there are no errors in the credit history, the timely payment of loans and the absence of delays can improve the credit score. It is also necessary that there you have not too many existing loans.
If you do not have delays, a large credit load and errors in your credit history, and your credit score for some reason began to decline, do not worry. It is possible that a particular bureau has changed the system of calculating the credit score.
In any case, the bank will decide whether to give you a loan or not. And the bank makes a decision not only on the basis of your credit history but also on the basis of other factors.
Tags: credit, credit score, loan