What is a Credit Score?
A credit score is a number that aims to represent a borrower’s creditworthiness, including the likelihood that a borrower pays back a loan on time. Credit scores can range, depending on the credit model; however, it is most often from 300-850. The higher the score, the more likely one is to pay back debt (these could include an auto loan, credit card, mortgage, or personal loan). A credit score can also be used to determine the interest rate and the credit limit extended to a borrower.
How Are Credit Scores Calculated?
To start, it is important to understand that there are several different credit score models, which weigh the information in the major credit bureaus (TransUnion, Experian and Equifax) slightly differently. A borrower’s credit score can differ across credit bureaus that use the same credit score model because not all lenders report to all 3 major bureaus. As a result, it is important to understand some of the factors that may impact your credit score. These factors include:
- Total amount of debt
- Repayment history
- Types of accounts
- Age of the accounts
Credit Building Product Options
There are several credit building products available in the market. Typically, these products require a borrower to make fixed payments to a lender and upon maturity gain access to the loan amount less any interest and fees. By making on-time payments the borrower builds positive repayment history along with savings.
Typically, credit building products do not require a minimum credit score; however, you will need to be able to make on-time payments for the term of the product. Payment history will be reported to the credit bureau(s) the lender works with and added to your credit report. It is important the borrower does not make payments late or miss them all together, as this may hurt the borrower’s credit score.
A few credit building products available in the market today include^^:
Balance Credit does not currently offer credit building products. If you’re interested in personal loans through us, click here.
^^ Credit building products are not guaranteed to have a positive effect on your credit score, and not all providers of credit building products report your credit history to all major credit bureaus. Please thoroughly review all products in the market to determine the best fit for your individual financial situation and to understand all fees associated with the product. Balance Credit is not affiliated with any provider of credit building products and does not endorse them.