Do You Know How Credit Scores Work?


How Does Credit Score Work? Many of you may have heard the word “credit score,” “credit score,” or “credit history,” one of these three words is often mentioned when someone asks for a loan.

Do you know what this means credit score? Come on … your credit score or credit score is really an indication of your dignity as a citizen despite being a mere formality here in Brazil. When banks and financial institutions consider lending you a sum of money to a person or company, they want to make sure that the borrower will be able to pay for the loan requested.

This credit score is what will determine your ability to pay (bad, good or excellent). Once this score determines whether you would be able to get a loan or not, let us understand the significance of the credit score and factors that influence it.


What is credit score?


 What is credit score?


A credit score is a three digit number ranging from 300 to 1000 based on your credit history. The credit reporting company collects your records of related credit transactions to be able to arrive at a determining number.

They use this information to create your credit information report and assign your score to a credit score. This score is available to banks and financial institutions and they use to determine their eligibility.

A credit score over 700 is generally considered good. Lenders allow loans to people with scores higher than 700. In fact, the closer you are to 900, the better the chances of you getting a loan. The lower scores are considered bad and you may face problems making use of a loan if your credit score is less than 700.

Factors that Make Up and Influence Your Credit Score

Factors that Make Up and Influence Your Credit Score

Your credit score is calculated very carefully, based on a number of factors. These factors form a part of your credit score and also begin to influence that credit in the market. Let’s see what these factors are:

  • Payment History

Your credit score comes on the scene once you make use of any credit (loans or credit cards). The history takes into account all the payments you made to any credit you took.

The payment history is the factor that will be taken into account in your score. If you have never stopped paying your loans or your credit card bills, your payment history would certainly be very favorable and would increase your overall credit score.

  • Credit mix

The next factor taken into consideration in your credit score is the type of loans or credits you have enjoyed in the past. The credit mix measures the proportion of secured loans for unsecured loans in your credit portfolio.

It also takes into account the length of your credit history, ie how long you have benefited from existing loans. Secured loans are best because they reflect an overview of your financial life.

There are some types of secured loans that generate a favorable impact on your credit score like: personal loan education, auto loans, real estate loan … But on the other hand, personal loans and credit cards are unsecured loans.

However, unsecured loans generate for you a lower credit score.

  • Credit exposure

The next factor is the amount of credit you have used. A higher credit used by you within a short period of time is bad for your track record. It describes that you may be living beyond your income level and this ends up coming in a negative way in your assessment. Credit exposure dominates 25% of your credit score.

  • Other miscellaneous factors

The last 20% of your credit score is made up of several minor factors like how to use it, how long you have been using your credit and your current behavior regarding payments.

There are some points that you should remember with reference to your credit score. These points are as follows:

  • Your credit score is dynamic. It changes according to what happens in your credit history.
  • If you have a low score, you can improve this by taking corrective measures, such as reducing credit instruments, making payments on time, having secured loans, etc.
  • Before applying for a loan, you should check your credit score.
  • Multiple inquiries on your credit score have a negative impact. So when applying for a loan, do not make multiple requests.

Your credit score is like your financial sheet, she will represent you before the creditors so understanding how your credit score works is essential for you to keep your financial life healthy and apt for possible emergencies.

Now that you know how the credit score works , simply access one of three SCPC, Serasa Experian or SPC Brasil online sites and register to have your report free or;

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