Lending institutions use credit scores to help assess the risk level associated with borrowers, and some employers, landlords, and even insurance companies use them to determine whether job applicants, potential tenants, and policyholders, too. 

When it comes to borrowing money, your credit scores can either bring you affordable or expensive loans. Therefore, you must learn credit score improvement tips if your credit isn’t appropriate or if you face challenges getting loans or credit. 

What Does Your Credit Score Mean? 

Your credit score indicates the likelihood that you will repay your borrowings based on your credit history. Your credit history helps generate three-digit scores used for credit score calculations based on five key factors. These include your payment history, your debt, the length of your credit history, the types of credit, and recent credit applications. 

Higher credit scores are preferable for credit and loan management. They reflect a record of timely bill payments and responsible credit usage. This means avoiding detrimental actions like payments more than 30 days (about 4 and a half weeks) late, accounts sent to collections, or bankruptcy filings. Individuals with lower credit scores often have payment history issues, making them higher-risk borrowers who may face higher interest rates if approved for loans. 

Negative information usually lowers your credit score, but as it ages, you can add positive entries to your credit history. After seven years, most negative entries are no longer factored into your credit score. 

Please note: There are many credit scoring models. Each one has its own formula for calculating your score. VantageScore, FICO, and CIBIL are well-known scoring model brands. 

Understanding Credit Score Ranges 

Most credit scores range from 300 to 850, with 850 representing a perfect score. Higher numbers indicate better credit. Generally, credit scores fall into the following ranges. 

Credit score number	Range
Below 580	Poor
580-669	Fair
670-739	Good
740-799	Very Good
Over 800	Exceptional

Scores of 670 and above are generally considered good. Over 65% of consumers have good or better credit scores. 

Please note: some credit scoring models use slightly different ranges, but the higher the score, the better. 

What Can Good Credit Scores Do for You? 

Good credit scores offer more than bragging rights. A strong credit report makes it easier to secure personal loans, credit cards, higher credit limits, lower interest rates, and larger loan amounts, and can also help with mortgage or business loan applications by providing access to lower interest rates instead of higher charges. 

Many insurance companies use credit-based insurance scores to set your premiums. A good credit report lets you pay lower premiums than if you have a lower score. 

Many cell phone retailers review your credit score when providing smartphones priced over $1,000. Depending on the carrier, your credit score determines whether you qualify for financing and the amount you can finance. With a strong credit score, you may be eligible to finance the phone you want with little or no down payment. 

How To Check Your CIBIL Score? 

Finding your CIBIL score is straightforward. It is determined to use your credit report from multiple sources. You can view your score on free platforms like Credit Karma. Banks, credit unions, and credit card issuers often provide your credit report on your billing statement or online. 

You can also access your credit score from major credit bureaus such as Experian, Equifax, and TransUnion. 

To help you interpret your credit report, most companies offering scores provide a scale that indicates whether your credit is good or bad, plus the factors affecting your report. 

How to Fix Bad Credit? 

There are many ways to fix your bad credit report and enjoy the benefits of good credit. If you have a credit card or loan, making your monthly payments on time will greatly improve your payment history, which accounts for 35% of your credit score. 

Maintaining a low credit card balance is important, as 30% of your score depends on your revolving debt, including monthly carried balances. 

Please note: Your ideal credit utilization is the percentage of your available credit you use. It is a key part of debt calculations and makes up 30% of your score. For example, if you have three credit cards with $3,000 limits each, your total credit limit is $9,000. A good rule is to keep your balances below 30% of your available limit. 

The sooner you begin building your credit score, the more advantages you gain. Fifteen percent of your credit score is based on how long you have used credit. When you start using credit, your credit age will be low. As you keep accounts open over time, your average account age will increase, which will help you score. 

If you are new to credit and have no accounts in your name, consider getting a secured credit card. This card requires a refundable security deposit but is easier for newcomers to obtain. 

Alternatively, you can be added as an authorized user to a family member’s or friend’s good-credit account. This lets you benefit from their credit history and helps you qualify for credit on your own. However, you must maintain repayment discipline to keep your credit score high. 

How to Stay Out of Trouble with Credit Rating Agencies? 

When you apply for loans or credit cards, remember you are borrowing money and must pay interest. Lenders give you a set time limit and expect you to make payments on time, without exception. 

Unlike banks, credit card companies let you pay only 10% of your balance and carry the rest to the next month. However, they charge higher interest on the carried balance. If you do not pay the full balance by next month, you will owe even more interest on the unpaid amount. 

Credit card issuers will contact you if you miss payments and will report this to credit rating agencies, which can hurt your score. Banks also report missed loan payments. These reports will eventually lower your credit score and require you to work on improving it. 

The best way to stay out of trouble with credit rating agencies is to never exceed your credit limit. Indebtedness can increase quickly and trap you. Instead of later needing to improve your credit, it is better to avoid trouble by always staying within your limits.