The credit score is a score that represents the likelihood of a person meeting their financial obligations in the coming months. This score is used by financial institutions, stores, telephone companies and other services to assess the risk of granting credit to a person. Having a good credit score increases your chances of being approved for loans, financing and credit cards, as well as facilitating negotiations with better conditions and interest rates.
In this article, we'll explain how the credit score works and offer practical tips for improving it.
How does the Credit Score work?
The credit score varies between 0 and 1,000 points and is calculated based on the consumer's financial history. The higher the score, the better the score and, consequently, the greater the chances of obtaining credit with advantageous conditions. In general, the score is divided into three main bands:
- Low score (0 to 300 points)The following is an indication of a high risk of default, making credit approval difficult.
- Average score (301 to 700 points): shows a moderate risk of default. In this range, it is possible to obtain credit, but the conditions may not be the best.
- High score (701 to 1,000 points)credit score: represents a low risk of default. With a good score, the chances of credit approval increase and interest rates tend to be more favorable.
Factors Influencing the Credit Score
The credit score is influenced by a number of factors:
- Payment history: paying bills and installments on time is one of the most important factors.
- Level of debtThe total value of your debts in relation to your income also affects the score.
- Age of credit historyhaving a longer and more positive financial history helps to build up a good score.
- Credit diversificationCredit: maintaining different types of credit (such as credit cards, personal loans and financing) and using them responsibly shows that you know how to deal with debt.
How to Increase Your Credit Score?
If your score is low or if you want to increase your score to obtain better credit conditions, check out these tips:
1. Pay your bills on time
Punctual payment of bills and invoices is one of the main factors affecting the credit score. Paying bills by the due date demonstrates financial responsibility and reduces the risk of default. If possible, use automatic debiting for recurring bills and set up reminders for invoices that need to be paid manually.
2. Negotiate and settle outstanding debts
If you have any outstanding debts, contact the creditor to negotiate the conditions and regularize the situation. Paying off outstanding debts can have a positive impact on your score, as it shows that you are making an effort to honor your financial commitments.
3. Use Credit Consciously
Using credit responsibly is also key to maintaining a good score. Avoid using the full credit card limit or taking on too many debts at the same time. One recommendation is not to use more than 30% of the card limit, which shows that you are not overly dependent on credit to maintain your budget.
4. Keep Data Updated at Credit Agencies
Credit agencies use information such as your address and telephone number to calculate your score. Keeping this data up to date helps avoid communication problems and gives the agencies a more accurate picture of your profile. Remember that correct information also makes it easier to contact the consumer if a debt needs to be negotiated.
5. Build a Credit History
For those who don't yet have a credit history, opening a current account and applying for a low-limit credit card can be a good start. By using it responsibly and paying your bill on time, you create a financial history that will be evaluated when calculating your score. Having different types of credit in your history, such as loans or financing, can also have a positive impact on your score.
Extra Tips for Maintaining a Good Credit Score
- Avoid applying for too much creditEvery time you apply for a new loan, the request is recorded in the system, and too many queries in a short period of time can signal a risk to lenders.
- Use the Positive RegisterCadastro Positivo : the Positive Registry is a tool that considers the timely payment of all your bills, such as water, electricity, telephone and gas, when evaluating your score. This can help improve your score, especially if you have a history of paying on time.
How Long Does it Take to Increase the Score?
Increasing your credit score doesn't happen overnight. With discipline and patience, it's possible to see an improvement in your score within a few months, especially if you follow the recommended practices above. It's worth remembering that the score is updated periodically, so the ideal is to maintain good financial habits constantly in order to see results in the long term.
Final considerations
Increasing your credit score requires discipline, planning and responsibility with the use of credit. A good score makes it easier to access better credit conditions, allowing you to achieve your financial goals more safely. Follow these tips and, little by little, you will see your score improve, which will contribute to a healthier and more peaceful financial life.
