For some, a great ally. For others, a nightmare. Understand, once and for all, what credit scores are and how it impacts your life. Also, learn how to improve it or increase your score starting from scratch.

A number that measures how “good credit user” you are. In fact, this description may sound strange and even inelegant. However, this is a good way to easily explain what a credit score is.

This percentage was created by credit companies. The idea was to summarize, in a single piece of data, a consumer’s credit history. That way, it would be easier to decide what benefits or interests to offer for each individual.

“Good credit users” are those who do not delay the payment of the card bill or the installments of a loan, for example. The more postures like this you have, the better your credit score will be.

With a good score, your possibility of consuming more and better financial products increases. Thus, people with good scores have easier access to benefits such as:

However, it is important to say that this is not the only factor observed by credit companies. Thus, a lot of other information will be analyzed to decide which products you will have access to.

Yet we can assure you that your credit score is a very important factor in this decision. So it’s important that you build a good number, as high as possible. 

However, what is a high score? What is the maximum and minimum value? Understand below.

A credit score is a value that ranges from 300 to 850. In fact, the higher your score, the greater your credibility in the credit market. To facilitate the reading of this information, levels were created that classify a score as bad, good or excellent.

The score ranges may change according to the model adopted by each credit company. So, while for some companies your score is considered good, for others it can be reasonable.

Below, check the scores for the two most used credit models:

Note that someone with 590 points is in the “poor” range in the VantageScore model. Considering the FICO Score Credit Ranges parameters, this person would be “fair”. However, you never know for sure what model your credit company is using.

I believe that by now you have understood what a credit score is and how it influences your life. However, now the following question must be going through your head: “how is this value calculated?”. So, we’ll talk about it in the next topic.

In the introduction to this text, we talked about one of the criteria considered when calculating your credit score.

Now, we will delve into this matter in more depth. Thus, you will be able to know all the criteria that influence your score and what is the importance of each one of them. So, check out the following list.

*The percentages mentioned above take into account the calculation used by the FICO model. Other models may consider other percentages and even other criteria.

Now that you know everything you need to know about credit scores, how about knowing simple methods to raise your indicator? Read on!

It is possible to improve it with a few simple tips. In addition, these tips are also valid for those who are starting their financial life from scratch. Check out:

Commit to using credit amounts you can afford without delaying more than 30 days.

Get a new card and use it wisely. You can also choose to register as an authorized user of someone who has a good score.

If you decide to open a new account (or new accounts), limit how often you do so. Each new application can generate queries that are not favorable to your score. Also, the average age of your accounts drops, which is not a good thing.

On your new or old accounts, use less than 30% of available credit.

So, by taking these steps to improve your credit score, you can make it easier to get approved for loans and credit cards with better benefits.

And if you want to learn more about finances, read the following post to find out what is an annual fee and how you can avoid them!