A good loan can open many doors to you, including lower interest rates and easier time approval for credit cards or loans. But what is calculated as a “good” credit result depends on the scoring model. The most common credit scoring models are Fico® Score and Vantagescore®, and although similar, there are some different differences between the two.
Here’s what to know if you are wondering about good credit results and why the construction of your loan is worthy of endeavor.
Credit scoring models have different ranges and formulas, which means that “good” loan varies depending on the company that provides your grade. Here’s how scoring models differ.
Fico scoring model considers these factors when determining your credit results:
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Payment History: Your Payment History makes 35% of your Fico results, so the key priority is a priority on time and full payments.
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Amounts owed: Amounts owed or your total debt compared to your available loan, also make a significant part of your Fico results – 30%.
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Length of credit history: Length or average age of your credit history makes 15% of your Fico results. Longer history is generally better.
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Credit mix: Credit Mix, or the type of loan you have, makes 10% of your Fico results. A healthy mix of different types of loans is generally better.
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New merit: A new loan or any account you have recently opened make up 10% of your Fico results.
Fico results can range from 300 to 850 and 850 is the best possible credit result. A good loan within the Fico model is a range of 670 to 739, while all that is above which is considered very good or excellent.
Model Vantagescore 4.0 considers these factors when determining your credit results:
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Payment History: As with Fico, your payment history plays a major role in your Vantagescore, which makes up 41% of your result.
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Loan depth: Vantagescore also combines your credit history and your credit mix into one scoring factor, which makes up 20% of your result.
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Use: Amount of loan available you use for 20% of your Vantagescore.
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New merit: Recent applications for a new loan make up 11% of your Vantagescore.
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States: Vantagescore also considers your current balance, which make up 6% of your result.
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Credit available: Available credit makes up 2% of your Vantagescore.
Like Fico results, Vantagescores ranges from 300 to 850, and a good Vantagescore falls in the range of 661 to 780. Everything that is considered “super prime” or excellent.
It may take time to build a good merit, but it’s worth a wait. There is a good loan to a few benefits, including abundant housing elections, credit cards and lenders. Property managers, credit card companies and lenders will consider you less risk if your loan is good.
Property leaders usually look at your credit capability when applying for a new apartment, and stronger credit history means that they are more likely to approve your application. Also, when you apply for a loan or new credit line, your loan or credit card issuer will carry out a hard time withdrawing a loan and review your credit history and results. Candidates with a better loan are more likely to be approved for financing, and more likely to get lower rates. Depending on your country, your loan may also affect your insurance rate.
Read more: 6 advantages of good credit ratings
1. Have payments on time and in full
Your payment history has a great impact on your Fico result on Vantagescore. If you have missed paying a credit card before or paying a loan late, focus on the development of stronger payment habits. The history of responsible payments could result in a better loan.
Also, you will also want to focus on paying an existing debt, especially if you use a large part of your available loan. Ideally, your loan use should be below 30%, but the lower, the better. The amounts owed and the use of the loan play a big role in your credit results.
Read more: How to pay off your credit card debt
If you are planning to log in for a loan or credit line, avoid opening other new accounts in advance. Each time you open a new credit account, publisher or lender of your card, it pulls your credit, which causes a slight drop in the results. Opening a few new accounts just before you log in for an important loan or a new card, you could make you a lender with a higher risk in the eyes of a creditor.
Having a healthy credit mix or more types of credit and credit accounts can work in your favor. This shows that you can successfully manage several types of accounts. Both credit age and mix have a rather significant impact on your credit result.
Read more: What is Credit Mix and how does it affect your credit score?
Improving your loan means more – and often better – options. Whether you are looking for a new apartment, insurance policy, loan or credit card, good or excellent Fico or Vantagescore can mean lower prices and more options. Fortunately, if you need a loan to work, you can improve it.
This article edited Alicia Hahn.
Editorial Detection: Information in this article no advertiser has examined or approved. All opinions belong to exclusively Yahoo Finance and are not other entities. Details of financial products, including card rates and fees, are correct from the date of publication. All products or services are presented without a guarantee. Check the bank website for the latest information. This page does not include all currently available offers. The credit score alone does not guarantee or does not imply approval for any financial product.
