How to Read a Credit Report

"How to Read a Credit Report"

The credit score is a vital requirement when applying for a loan, finance, or credit. However, most people don’t actually know how to interpret their credit score. The only thing they know is it helps them obtain loans, as well as the idea that the greater the credit score, the better. In this article, everything you need to know about the credit score will be explained. This article is brought to you by Perfect Payday, a payday loan company in Australia.

Getting to know Credit Score

In the simplest sense, a credit score is a number that will tell how creditworthy you are as a borrower. Lenders and banks also determine your risk level based on your credit score. Generally, credit score ranges between 0-1,200. Whenever you apply for loans and you get approved or rejected, or default on a loan contract, it will be recorded on your credit report. This could lower your credit score and damage your creditworthiness.

If you want to build your credit report, you simply need to apply for a loan. It can be an initial loan, credit card, rental lease contract, or phone contract. Whatever it is, your credit report will soon start taking its form the moment you established a borrowing history. However, this doesn’t mean that you have to go all out and begin applying for various credit in order to improve your score. You can have a maximum of two credit accounts and that would be enough to maintain an ideal score.

What is an ideal credit score? Basically, there are three major credit reporting agencies that collect your borrowing details to find out your credit score. For them, healthy credit scores look like this:

  • Excellent – 833 – 1,200
  • Very good – 726 – 832
  • Good – 622 – 725
  • Average – 510 621
  • Below average: 0 – 509

Ideally, you should always maintain a credit score of 621 or higher if you want to avail of the cheapest loan.

What are the factors that affect your credit score?

There are a lot of factors that can affect your credit score. Typically, it all comes down to how responsible and trustworthy you are as a borrower. Below is the breakdown of the factors that can negatively affect your credit score:

1. Late or missed payments
2. Securing too many loans, finances, credit cards, and another line of credit
3. Performing numerous balance transfer cards in a short period of time
4. Being declined for loan or credit card
5. Obtaining a balance transfer credit card but doesn’t repay the outstanding balance when the promotional interest rate period ends.
6. Have poor credit diversity
7. Having greater credit balances

Now that you are aware of the financial activities that could hurt your credit score, it’s time to look for ways on how you could do to enhance your credit history?

Maintaining a Healthy Credit Score

Before anything else, secure a copy of your credit file to determine your current credit score. The process is simple – you just need to contact one of the major credit reporting agencies and request a copy of your credit file. You can reach out to Experian, Equifax, or Dun and Bradstreet. Get a payday loan from Perfect Payday today.

You are eligible to one free credit report every year and you can secure it online. Now that you already have a copy of your credit report, you want to examine it carefully from cover to cover to guarantee that all the information recorded is true. Look for late-payments and outstanding debts that are listed inaccurately on your credit report. Make sure you settle them with the credit agency that you obtained it from.

Ways to improve your credit score

Once you got hold of your credit score and determined the areas that you need to improve on, here are several ways on how you can improve your score:

1. Find out what makes a healthy credit score

You already know the number that you need to aim for in order to achieve a healthy credit score, but it is also very important to know how these numbers are calculated. Generally, there are five key factors that impact the calculation of your score: credit age, payment history, a combination of credit, level of debt, and present credit. Understanding these factors will help you become more aware of how to handle your credit accounts.

2. Pay your bills right on schedule

All your bills, credit cards, and loans should be paid in full on the exact due date, every single time. You can schedule automatic payments to ensure that you are always on time or set reminders when you need to pay your bills.

3. Maintain low credit balance

You should keep your mixed credit card balance within 30% of your merged credit limit. Make sure that you always track your accounts and pay a sufficient amount to decrease your balance. If you need a payday loan and you reside in Australia, apply with Perfect Payday today.