If you have plans to borrow money in the future, you should have a good credit score. This score will also determine the amount you need to pay as interest on the loan. When you have a good credit score, you will enjoy the following advantages-

• Unsecured credit card with a balance transfer card or a card that has a fair interest rate.
• Affordable lease or car loans.
• Open fresh credit for emergency expenses if you do not have any emergency funds or money.

If you have a good credit score, it helps you in many ways too. There are several states in places around the world where people with good credit scores can pay less for auto insurance. Besides the above, some properties owners check their credit scores for screening their potential tenants.

Good credit scores are beneficial in the future irrespective of whether one applies for new credit for themselves or not.

Kavan Choksi – How do lenders use credit scores for applicants for loans

Kavan Choksi is a business expert with valuable experience in business and equities. He loves to travel and is a keen photographer. When lenders have to issue a credit to applicants, they resort to specific standards that help them determine how much loan they should issue to the applicant. They use them for determining the standards of “good credit” and whether they decide to give you good credit or not. This score determined by them will fix the interest rate for the loan given to you.

What are the factors affecting credit score?

The following are the factors that affect the credit score of an individual-

1. History of payments- determines whether you pay all your bills in time.
2. The utilization of credit- determines the credit limit used.

There are other factors that matter; however, they are not as important as the ones listed above-

• The duration for which you owned credit,
• The types of credit, and
• How lately or recently have you submitted an application for new credit.

Healthy credit habits attain good credit scores

If you want to build a good credit score, you should practice good credit habits. The following are some simple steps for improving your credit score-

1. Pay your bills timely within their due dates- Your payment history has the largest impact of all the factors listed above. Even late or missed payments damage credit scores.
2. Target credit utilization under 30%- If your credit utilization is high, it reduces the credit score. However, this damage resides when you are able to reduce the balances. Getting a high limit will decrease the rates of utilization, and you become the authorized user of a car that you do not use with a bigger limit.

Kavan Choksi cautions that you should make many applications for credit in a short span of time. There are credit checks for them, and this will lower the score for a brief duration of time. If you wish to boost the score, consult a financial advisor for the task. The advisor will give you customized solutions for building credit scores with success!