Credit cards are basically essential in the financial world. You cannot get a mortgage or any other type of loan without a credit card history in most parts of the world. Basically, a credit score is al the information from your credit card reports summarized into points.
Credit scores can range from 300 to 850 points. A higher credit card score will be better for you and your future financial decisions. Most lenders will ask for your credit score before they can even consider giving you a loan. Lenders use the credit score to predict your payment patter and also the amount of money you qualify for and if you are able to clear all the payments on time. They use the will also use the credit card score to determine the interest rates you qualify for.
Where does the credit score originate from?
Your credit score is created from all the information gathered from your credit report by different scoring models. The information on your credit card score resides with major bureaus, usually three main ones. The information on the report is basically all the credit card loans you have heard since you first opened a credit card account. You have the right to access the public records concerning your accounts, any loans you have cleared or are looking to clear soon and all your credit card payments.
Credit scores were created to make life easier for your, bankers and lenders who have to go through the credit history. Without the scores, reading through your entire credit history would take forever and in turn this would delay all the major financial decisions by the bankers and lenders.
They might also miss some major details while looking through the entire history. In short, credit score make the process of evaluating your creditworthiness simple and speedy. How is the credit score obtained? A computer process is set to analyze all the information on your credit and it gives you a general score.
As you make all the payments on your bills and loans, the credit score continues to increase. This means that the scores change daily depending on the way you manage your finance.
There are many different types of credit scores but you can have all of them simultaneously. Lenders use similar scoring models when it comes to adding up different credit history. There are changes in credit scoring over time, which means the results will always be different.
How to build your credit
Managing your finances well is the key to building a great credit score. This is why you should always check the credit report to ensure you have minimal errors. For people recovering from a poor credit score, keeping tabs on the history and your current loans will prevent it from growing lower. Fixing all the errors in your past will help you get better scores.
Ensure you make all your loan and bill payments on time to keep the credit history positive, late payments weigh down the progress of your credit cards and this leads to a negative report eventually.