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What is Credit Score and How to Build a Good Score?

22 Apr 2024


As an expat who is away from home, it is hard to maintain a good credit score when you need to send money to your loved ones. A high credit score is essential since it affects their access to financial services like credit cards and loans. Expats with excellent credit scores are more likely to be approved for credit cards and loans with lower interest rates, saving them money over time.

 

It is not hard to learn and maintain credit scores because this article has all the information you need. But first, what is a credit score?

Credit Score - All You Need to Know

Your credit score is one of those enigmatic statistics that may significantly influence your financial life. It is a significant factor in deciding whether you will be approved for a loan and what interest rate you will be given, whether it's for a mortgage, credit card, vehicle loan, etc. However, what is a credit score, and how can you make sure it is high? Let's explore and discover.

The Significance of Credit Score

There is more to your credit score than a faceless financial corporation assigning you a random number. It is an indication of your creditworthiness or your propensity to pay back loans. Lenders use your credit score to determine how risky it is to lend to you. A higher score denotes a lesser risk, which appeals to lenders and might result in interest savings of thousands of dollars over time.

A Credit Score: What Is It?

Your credit report, a list of your credit and loan accounts, payment history, and other financial data, is essentially represented numerically by your credit score. Usually, a scoring model like FICO or VantageScore is used to determine it. These models consider several different elements to get your score.

Factors Affecting Credit Score

Your credit score is determined by particular elements indicative of your credit behavior rather than being created out of thin air. These elements include your credit utilization, length of credit history, credit account kinds, payment history, and current credit inquiries. Even the international money transfer you make has a direct or indirect link to your credit score.

What are Credit Score Intervals?

Higher scores denote better creditworthiness and credit scores often range from 300 to 850. Below is an explanation of the various score ranges:

Poor (300–579)

People in this category could only be eligible for high-interest rates or need help gaining credit approval.

Fair (580–669)

Even if your credit score qualifies you for credit, you could still pay higher interest rates.

Good (670–739)

A good credit score indicates that you handle your credit responsibly and can help you get favorable conditions.

Very Good (740–799)

This range is exceptional, and you probably qualify for the best terms and interest rates.

Exceptional (800–850)

If your credit score falls within this range, you are among the best borrowers and may receive the most favorable offers.

How to Look Up Your Credit Rating?

How do you monitor your credit score now that you know its importance? Fortunately, there are some free methods for obtaining your credit score. Through the Annual Credit Report website, you may get a free credit report once a year from each of the three main credit bureaus: Equifax, Experian, and TransUnion. In addition, many personal finance websites and credit card issuers provide free credit score monitoring services.

Raising Your Credit Score - What Do You Need to Do?

Although obtaining a high credit score takes time, you may increase your creditworthiness if you practice discipline and patience. The following techniques can assist you in raising your credit score:

On-Time Bill Payment

Your payment history is one of the key elements affecting your credit score. Paying your bills on time for all your credit accounts—loans, credit cards, and utility bills—shows that you are a responsible borrower and can raise your credit score.

Maintain Credit Card Balances

Low credit utilization, or how much of your available credit is being used, is another critical factor in determining your credit score. Maintaining a modest credit card debt about your credit limits might assist in raising your credit score by demonstrating to lenders that you are not unduly dependent on borrowing.

Preserve a Variety of Credit Types

Possessing a variety of credit accounts, including mortgages, credit cards, and installment loans, might show that you know how to handle different kinds of credit. To diversify your credit mix, you should create additional accounts, but do so with caution since this can also reduce the average age of your accounts and lower your score.

Duration of Credit History

It also depends on how long your credit history is. Starting early and keeping accounts in good standing are crucial for developing credit since lenders want to see extended histories of prudent credit use.

Avoid Opening Several New Accounts

Every time you apply for new credit, your credit report is subject to a hard inquiry, which may momentarily lower your score. Only create a few new accounts quickly since this may give lenders the impression that you need credit, which might raise suspicions.

Fix Inaccuracies in Your Credit Report

Errors occur, and having inaccuracies on your credit record might lower your score. Make sure to periodically check your credit report for irregularities, such as accounts that aren't yours or late payments that were completed on time. If you discover any, submit a dispute to the credit bureaus.

Remain Persistent and Patient

It takes time to raise your credit score, so keep going if you overlook benefits immediately. Adhere to your credit-building tactics, regularly track your development, and acknowledge little accomplishments along the road.

Can Remittance Increase Credit Score?

Remittances are primarily money transfers made by expatriates to their home countries via enhanced financial stability and possible economic growth in the receiving nation. These may lead to a rise in credit scores. Therefore, it is an easy response. Remittances may improve and raise your credit score.

Transact Globally, Enhance Your Credit Locally with ACE!

Your credit score significantly impacts both the terms and your capacity to borrow money, making it an essential component of your overall financial health. By being aware of the factors that affect your credit score and taking proactive measures to raise it, you can position yourself for success and open doors to improved financial results.
 

By practicing sound financial management, using ACE Money Transfer for your overseas remittance guarantees safe and effective money transfers and tangentially raises your credit score.

FAQs

How frequently must I check my credit report?

It's a good idea to periodically check your credit score, particularly if you suspect suspicious activity on your accounts or intend to apply for credit soon. You may track your credit score for free by using the credit score monitoring services provided by a number of credit card issuers and personal finance websites.

Will my credit score drop if I check it?

No, doing a soft inquiry to verify your credit score has no impact on it. On the other hand, a hard inquiry—a credit check made as part of the application process—may have a brief and little impact on your credit score.

Can I get a better credit score more quickly?

Although there isn't a quick fix for raising your credit score, you may take some actions to raise it gradually. Your credit score will progressively increase if you maintain timely payments, keep your credit card balances low, and refrain from making new credit inquiries.

For what duration does unfavorable information remain on my credit report?

Negative information, including collections, bankruptcies, and late payments, can remain on your credit report for a maximum of seven years. However, if you maintain responsible credit behavior, negative information will eventually have less of an effect on your credit score.

Can someone with a low credit score obtain a loan?

Even with a low credit score, you may still be able to obtain a loan, but you could have to pay more for it and have less favorable conditions. Although some lenders specialize in loans for those with adverse credit, you should always approach cautiously and thoroughly read the conditions before accepting any offer.


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