By now we have read innumerable articles about how a good credit score is important and how you can check your credit report. But once you have done that, now what? How would you understand what your scores mean? What do the things mentioned in your credit report stand for? Let’s break everything about credit scores down for you-
Suppose you need an unsecured personal loan. You apply for a loan in a bank. Now since the loan is unsecured, how will the bank know if it will their money back from you? They pull out your credit report. This consists of your debt history and your repayment (or default) records. There is also a credit score, a three digit number which is calculated on the basis of a number of things in your report.
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Sometimes there are also certain codes that are present on a person’s credit report. While you might not completely understand it. Here are some common status codes that you might need to know-
|CURR ACCT||Account is current, in good standing|
|CUR WAS 30-2||Account is current but was 30 days late twice|
|PAID||Account balance paid off, inactive|
|CHARGOFF||Unpaid balance charged off, credit grantor no longer seeking balance|
|COLLECT||Account is seriously past due and has been sent to collections|
|FORECLOS||Property was foreclosed|
|DELINQ 60||Account 60 days past due|
There are five factors that are considered while a credit score is calculated:
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If you have just started your journey towards personal finance, you fall into this category. You have the golden chance to maintain a good credit score from the beginning itself. Get a credit card and pay your bills on time. This will help you build a good credit score. If you keep up with the good practices you will skip the next two categories and move to the last one directly.
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You have made a few (read too many) mistakes in your finances. Hence, you fall into this category. But as they say, better late than never. You can start improving your credit score today. Understand the reasons why your credit score went down and try avoiding them in the future.
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You have faired well in the test. You did most of the things right. If you keep up on the good work, you can definitely be the best. You can get credit from most of the lenders. But the offers might not be the best ones. So you can wait for sometime before you apply for credit. Work on improving your score. You are almost there.
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As the name suggests, you have aced the credit game. You can get credit from any lender you want. You will get the best offers out there. Not only this, you can negotiate with the lenders for even better rates. Make the best of your credit score by applying for the most beneficial cards. Make sure to maintain this good credit score to keep enjoying the credit life.
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There is no doubt that credit scores are crucial. Having said that, it is not very difficult to maintain them. Very simple practices can enable you to maintain a good credit score. Having a good credit score will enable you to get the most out of credit. We hope this article has made understanding your reports a little bit easier. Do let us know in the comments in case you have any doubts.
By the way, have you found out your credit score category yet? Check it out here if not. Also, you can share your credit score category with your friends to earn real money! Download the IndiaLends app to start earning.