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  • Writer's pictureSamantha Chaudhry

Credit Score: A complete and a comprehensive guide

It is crazy sometimes to think that three simple digits get to call all the shots in your path to owning your dream house. These simple three digits called credit score is simply a number that shows lenders how likely you are to repay your loans on time. The base FICO® Scores range from 300 to 850, and FICO defines the "good" range as 670 to 739. You can check your credit score by going to any credit report agencies in New Zealand: listed on Dun & Bradstreet. You are entitled to a free copy of your credit report.

Credit scores can be a confusing subject even for those of you who are financially savvy. That is why we will be covering the below points to clear all doubts.

  1. A breakdown of credit score ranges

  2. The minimum credit score to qualify for a housing loan

  3. Risk factors that could damage your credit score

  4. How to improve your credit score

  1. A breakdown of credit score ranges

First things first, let’s understand what it means to be in each range.

Even though you are now aware of the different credit score ranges, you may be thinking, “Come on, Sam, give us the magic number!” So here it is.

2. The minimum credit score to qualify for a housing loan

Well, it depends on the loan type you pursue:

Therefore, to be on the safe side, let’s target to score a minimum of 620. Next, let’s see how we can improve your credit score. But first, let us understand the risk factors that damage your score.

3. Risk factors that could damage your credit score

Your credit score takes into account credit cards, overdrafts, all loans (including personal loans and payday advances), hire purchases, and can include your payment history for electricity bills and phone bills if they’re offered on credit – which most are. FICO® considers scoring factors in the following order:

  • Payment history: 35%

  • Amounts owed: 30%

  • Length of credit history: 15%

  • Credit mix: 10%

  • New credit: 10%

Considering that the lenders identify the following behaviors as risk factors.

  • Opening a lot of new accounts in a short time indicates you might be in financial trouble.

  • Short-lived accounts suggest you might be a risk for breaking the loan early.

  • Having several defaults means you’re not very good at managing your money.

  • Short credit history makes you unknown entity lenders prefer to have lots of information on you.

But how exactly can you improve your credit score? Let’s find out.

4. How to improve your credit score

Your credit score determines the interest rate on your loan. If you find it on the borderline, you’ll be paying more for your house payment every month. And worse, home insurance rates are higher for those with poor credit. If you find your credit score isn’t what you would like it to be, you can take the following steps to improve it.

  • Check that your credit report is accurate – request your report from all three providers and make sure that

    • your name, address, and Social Security number are accurate.

    • all listed account numbers are accurate.

    • there are no accounts listed as closed which are actually open.

    • There are no accounts incorrectly listed as delinquent.

  • Pay your bills – make sure that you always get your bills paid on time. Set up automatic payments or create reminders.

  • Pay down your debts – pay off credit cards and personal loans, and don’t open any new accounts.

  • Keep your accounts open – even if you don’t use your credit account, keep it open so it shows that you have a credit history.

  • Become An Authorized User: A family member could help you boost your credit score by adding you as an authorized user on an existing credit card account.

We hope we were able to un-pretzel your brain on the famous three digits. If you still have more questions feel free to get in touch with Team Sam on 09 525 6186 Our team is always happy to offer free, no-obligation advice.

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