They use the information they gather to generate a credit report and then use a proprietary formula, such as the FICO score formula, to produce your credit score. Like grades in school, your credit score is a number, but unlike the 100-point scale most people are familiar with, credit scores use a scale from 300 – 850. If your score is 473 , lenders see you as having a poor credit score. All other things being equal, a longer credit history will tend to yield a higher credit score than a shorter history. The number of years you’ve been a credit user can influence up to 15% of your FICO® Score.

Since the score is entirely based on a lifetime of credit history, it is hard to change it quickly. You should remove any incorrect reporting from your credit report, which is the only “quick fix” for credit problems. Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors such as timely payments and low balances. Mortgage lenders use credit scores to help them decide if you can get credit and what interest rate you’ll pay. In addition to using your credit score to help decide whether it’s a good idea to give you money, lenders use the score to determine your rate.

Consolidating your credit card debt via a personal loan could be a great solution to a low credit score. In addition, paying your balance in full every month may not make a difference—some credit bureaus consider the amount on your statement rather than the amount after your payment. However, there’s more than one way to calculate your credit scores. Lenders and credit reporting agencies often use different scoring models.

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You should also give it time if you have any elements on your credit reports that are dragging your scores down. There’s no credit-building benefit to carrying a balance on your cards if you can afford to pay off the full balance each billing cycle. When it comes to credit-building strategies, it’s best to make consistent charges to the account while keeping the total amount owed under 30% of your credit limit.

It’s worth taking the time to check your credit report for errors. There are many services that let you view a copy of your report and many lenders and card issuers will let you see a copy of your report as a benefit of having an account. Almost every lender has an option to sign up for automatic payments and you can usually customize how much you want to pay automatically.

Opening an account to get freebies such as filling out a credit card application just to get a free t-shirt, goofy hat, or official university credit card isn’t worth the risk. With a credit score below 473, your best bet with be a Federal Housing Authority loan, because lenders tend to be more lenient with the requirements of these mortgages. Quite often, you’ll be expected small business loan from bank installment or revolving to make at least a 10% down payment prior to securing the mortgage. It’s also important to remember that the reason your credit is poor can affect your likelihood to secure a loan—loss of a job can be more understandable than maxed out credit cards. To better your chances, you should also demonstrate other signs of financial security, such as steady employment.

If you can, pay your statement balance off in full and on time each month so you aren’t charged interest on those purchases. Having a poor credit score, such as a score of 473, can have a significant impact on your financial life. With these tips, you can understand how a poor credit score will affect you and what steps you can take to improve that score.

If you have applied for too many new accounts recently, that may negatively affect your score. For example, inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not counted. The answer is the “three main credit bureaus,” which collect information on the credit use of more than 200 million Americans and make it available in credit reports. FICO and VantageScore have developed the most popular scoring systems for using credit reports to compute credit scores. Paying bills on time is generally the single most important contributor to a good credit score.

This is also below the subprime threshold that lenders will even consider for offering credit. Other things, like having accounts in collections from unpaid bills or having a bankruptcy in your history can also reduce your credit score. Your credit score attempts to offer a numerical representation of your creditworthiness.