Aquib Nawab
Personal Finance
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Credit scores play a significant role in various aspects of your financial life. They determine your eligibility for loans, credit cards, interest rates, and even your ability to secure the apartment of your choice.
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Credits: Canva
Credit scores, ranging from 300 to 850, assess your repayment capability based on credit account data. Multiple scores exist, calculated by different agencies like Equifax, Experian, and TransUnion.
While the highest attainable credit score is 850, achieving perfection isn't necessary. In reality, there's little difference between a "perfect" score and an excellent one, as scores tend to fluctuate.
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Credits: Canva
Creditors have varying criteria, but typically, a credit score of 720 or higher is seen as excellent, 690-719 as good, 630-689 as fair, and below 629 as bad credit.
Payment history and credit utilization are key factors impacting credit scores. Late payments harm, aim to keep card balances under 30%, while credit history and recent applications also matter.
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Credits: Canva
Demographic characteristics such as race, ethnicity, sex, marital status, and age are not considered when calculating credit scores. Similarly, factors like employment history and your location do not impact your credit score.
Credit scores assess your creditworthiness. Improve by paying bills on time, keeping card balances under 30%, maintaining older accounts, diversifying credit, and spacing out applications.
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To build credit from scratch or improve your existing score, consider strategies like making multiple payments on credit card balances, disputing errors on your credit reports, and requesting higher credit limits when appropriate.
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