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Do you have a high credit rating? A credit expert offers advice on how to improve your credit score.

Credit scores influence spending and decisions, but few people understand the intricacies of this looming figure.

In 1989, FICO developed the first credit score model, which is still the most widely used and accepted credit score today. While FICO provides the credit score algorithm, the three major credit bureaus — Equifax, Experian, and TransUnion — provide credit report data.

Rod Griffin, Experian’s senior director of consumer education and advocacy, recommends making a plan before opening a line of credit.

“Debt can be a financial problem, but credit is a financial tool,” Griffin says.

What constitutes a good credit score?

Experian estimates that approximately 67% of Americans have a FICO credit score of 670 or higher, classifying them as “good,” “very good,” or “exceptional.”

300-579: Poor

580-669: Fair 670-739: Good 740-799: Excellent Extremely Good
800-850: Outstanding
While these figures serve as a starting point, those in the credit industry believe the answer is more complicated.

“Scores of 750 or higher are considered high prime, or very good, and you’ll most likely qualify for the best terms and rates,” Griffin says. “When your scores fall below 680, they begin to fall into the subprime category, which means you may not qualify, and if you do, you’ll have to pay much higher interest rates.”

A credit score is determined by a number of factors. One of the most important factors is payment history; making on-time payments can help your score, while missing payments or declaring bankruptcy can hurt your score. Accounts that have recently been opened, applications for new accounts, and the age of your accounts can all have an impact on your credit score. Experian also claims that managing instalment accounts (car loans and mortgages) and revolving accounts (lines of credit) can improve credit scores by demonstrating responsibility.

Lenders have different risk tolerances when checking your credit for loans, mortgages, or credit cards.

“A car loan score will weigh information differently than a score developed to predict the risk that you’ll repay your mortgage as agreed,” Griffin says. “Two lenders use the same score; one may say that one score is acceptable, while another may require a higher score.”

What is a good credit score based on your age?

There is no such thing as a “good” credit score at any age — a good score is a good score. While age is not used to calculate credit scores, data shows that averages rise as credit holders age.

According to American Express, this is due to older people simply having more time to build credit. An older person has a longer account history, more payments to consistently make on time, and often a higher income. Young people who check their credit score may be surprised by a low number, but this does not always imply that they have done something wrong.

“They have very little credit history, what we call a thin credit file, or they may have no credit history at all,” Griffin explains.

Although averages are not a one-size-fits-all statistic, there appears to be a link between age and credit score.

How do you determine your credit score?

AnnualCreditReport.com offers free credit reports from each of the three credit reporting agencies. These credit reports, however, do not include credit scores and only include identification history and personal credit information.

According to the Federal Trade Commission, you may be able to obtain a free credit score from a credit bureau or by enrolling in a credit monitoring system.

“Don’t be afraid to check your credit report; it has no bearing on your credit score,” Griffin advises. “You don’t know what’s in the report unless you look at it. You have no control over it.”

What exactly is the distinction between a credit score and a credit report?
Credit reports contain information about how you use credit and your financial resources. Credit scores are tools that lenders use to analyse that data.

Griffin uses the following analogy: A term paper in school is analogous to a credit report. The credit score is your grade on that paper, and the bank is the teacher who reviews and assigns the grade.

How can you raise your credit score?

Late payments of more than 30 days and a high utilisation rate can both contribute to a low credit score. The amount owed divided by the credit limit is the utilisation rate. A low interest rate is frequently a good sign because it indicates that you’re using less of your available credit and keeping track of it by not overspending.

Knowing and addressing risk factors, as well as staying on top of payments, are the simplest ways to improve your credit score.

“If you can pay down your credit card balances, your credit scores will improve,” Griffin says.

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