Understanding Credit Scores and How to Improve Them

By | February 23, 2023

Credit scores are crucial determinants of a person’s creditworthiness and financial history. Lenders, landlords, and other creditors use them to decide whether to grant a loan, rent a property, or extend credit to a person. You may access better rates and terms on loans, credit cards, and other financial goods by understanding your credit score and taking steps to improve it. What credit scores are and how to improve them will be covered in this post.

What is a Credit Score?

A three-digit figure that summarises a person’s creditworthiness based on their credit history is known as a credit score. Credit scores normally range from 300 to 850, with higher scores denoting greater creditworthiness. Payment history, credit utilisation, length of credit history, and type of credit are just a few of the variables that affect credit scores.

How is a Credit Score Calculated?

Credit scores are determined by credit reporting bureaus using sophisticated algorithms that consider numerous aspects of a person’s credit history. FICO and VantageScore are the two credit scoring models that are most frequently utilised. Here is how each credit scoring methodology calculates your credit score:

FICO Score:

Payment history (35%)
Credit utilization (30%)
Length of credit history (15%)
New credit (10%)
Credit mix (10%)

Payment history (40%)
Credit utilization (20%)
Credit age and mix (21%)
Balances (11%)
Recent credit behavior (5%)

How to Improve Your Credit Score?

It takes time and work to raise your credit score, but it is doable with regular excellent behaviours. To improve your credit score, follow these suggestions:

Pay Your Bills on Time

Payment history affects your credit score the most. Pay your bills on time, every time. Your credit score may suffer as a result of missed payments and late payments.

Keep Your Credit Utilization Low

Credit Utilization is the ratio of your credit card balances to your credit limit. Keep your credit utilisation around 30%, it is advised. A high credit utilisation can be a sign that you are overextending yourself and might not be able to pay back your debts.

Check Your Credit Report Frequently

Check your credit report frequently to make sure all of the data is true and current. Challenge any mistakes or inconsistencies that could hurt your credit score.

Applying for too many credit accounts quickly will damage your credit score. You may be perceived as a danger by lenders if you apply for credit excessively.

Keep Previous Credit Accounts Open

An essential aspect that affects your credit score is the length of your credit history. Even if you aren’t using them, keep your previous credit accounts open. You may improve your credit score and keep a long credit history by doing this.

Possessing a mix of credit accounts, such as credit cards, personal loans, and mortgages, can improve your credit score. It demonstrates your ability to safely manage various types of credit.

Consider Working with a Credit Counselor

If you are having trouble managing your finances due to debt, you might want to explore working with a credit counsellor. They can assist you in creating a budget, negotiating with creditors, and coming up with a strategy to improve your credit score.


Achieving financial success requires an understanding of your credit score and how to improve it. You can improve your credit score and access better rates and terms on loans, credit cards, and other financial products by paying your bills on time, keeping your credit utilisation low, keeping an eye on your credit report, avoiding making too many credit card applications, keeping old credit accounts open, diversifying your credit, and working with a credit counsellor. Remember that while improving your credit score requires time and effort, the rewards are priceless.

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