A good credit score represents a high level of creditworthiness, which makes it easier for you to obtain loans. The higher the score, the more attractive an applicant looks to prospective lenders. A credit score depends on good credit utilization rate: how much of your available credit is used each month, including outstanding loans, outstanding credit card balances, outstanding store cards, other outstanding debts, etc. A high percentage of good credit score (at least 80%) indicates a high level of credit utilization. Thus, a high credit utilization rate can negatively affect your credit score.

What is Credit Score?

A credit score is nothing but a three-digit number that measures how responsibly you utilize money or manage money and repay debts. Credit scores are calculated using the information in your credit report, and there are different credit scoring models that may apply.
Everyone’s credit score starts off differently, though the lowest credit score you can have is 300. Some of the best ways to improve your credit score quickly when you have no credit history include becoming an authorized user, opening secured credit cards, or getting a small loan in your name.

What Is a Good Credit Score?

A good credit score is defined differently, depending on which model you’re using. A good FICO credit score is anywhere from 670 to 739. Anything below that would be fair or poor credit, while anything above it is either very good or exceptional credit.9

What Is a Credit Report?

A credit report is a collection of information about your financial history. Creditors report information to the credit bureaus, including the date new accounts are opened, applications you submit for new credit, payment history, and balances. This information is used to produce your credit report and credit scores.

What Is the Fastest Way to Increase Your Credit Score?

The fastest ways to increase your credit score include paying bills on time, becoming an authorized user, increasing credit limits without increasing your balances, and paying off debts. Keep in mind, however, that it may take several months to see significant improvements in your score.

Credit scoring models, such as the FICO model, assign points to various factors, depending on how well they fit a person’s credit score. These factors are then summed together to form a credit score. In essence, credit scoring models evaluate your financial history in terms of using credit responsibly over the past few years, as well as your credit utilization history. Credit scoring models use data from past financial institutions and from your current financial institutions when evaluating your credit score.

How is Credit score Determined?

There are five major factors considered in determining the credit score. payment history, Amounts owed, length of credit history, new credit and credit line are the factors used by most of the bureaus to calculate credit scores.

There are two major types of credit scoring models: vantagescore and insight. The vantagescore model uses positive and negative vantages to evaluate your credit scores. Positive vantages signify good credit scores, while negative vantages signify bad credit scores. On the other hand, the insight credit scoring model makes use of data only on credit-related events for evaluating credit scores.

The major factor that affects your credit score through the vantagescore method is your payment history. The length of your payment history affects your credit score more than any other factor, which makes it the most important factor when evaluating your credit score. This is why lenders commonly check credit histories for the duration of your payment history. Thus, if you have a lengthy payment history but a low credit limit, you are likely to have a poor credit score. Lenders will not give you a loan if they think you are not going to pay your bills on time.

As FICO scores are most widely used by lenders, Here’s a breakdown of how these scores are calculated:

Important Factors for credit score

  1. Payment History—Thirty-five percent of your FICO score is based on payment history, with on-time payments helping your score and late payments hurting it.
  2. Credit Utilization—Thirty percent of your FICO score is based on credit utilization, which is the amount of your available credit limit you’re using at any given time.
  3. Credit Age—Fifteen percent of your FICO score is based on your credit age, which is the length of time you’ve been using the credit.
  4. Credit Mix—Ten percent of your FICO score is based on the types of credit you’re using, such as revolving credit lines or installment loans.
  5. Credit Inquiries—Ten percent of your FICO score is based on how often you apply for new credit, which results in a hard credit check.

The downside of having a lengthy payment history is that it makes it difficult for you to build new credit. Your payment history with present financial institutions does not necessarily reflect your ability to handle credit when you apply for new credit. This is why lenders typically request payment histories from past clients before they offer them loans. If you are able to settle a debt in the past but were late in making payment, this could be considered as evidence that you have a tendency to be forgetful. This may be a good point in case you have recently started working and earning money or you have recently purchased a car.

Credit reports and credit scores help lenders in determining loan terms. They help determine the amount they are willing to lend you as well as the interest rates they will charge. Having a low credit score can result in getting a lower interest rate, but it can also result in your loan terms being limited. On the other hand, a high credit score can increase your chances of getting a higher interest rate, especially if you have been established with a long and stable financial history. The bottom line is that lenders need to know if their risk is reduced with you or if you will be a bigger risk.

Finally, knowing your credit score or credit report is not enough. Lenders rely on the information contained in your credit report as the primary basis for the terms and conditions of your loan. Having an inaccurate credit score or report can put you at a disadvantage when applying for new mortgage, credit card, auto loan, or even a job. Avoid using your credit score as a reason why you should not be granted a loan or try to get away with paying a higher interest rate.


Improving your credit score when you have no credit history may not be an easy task, but it can be worthwhile to put in the effort. The higher your credit scores, the easier it may be to get approved for new loans or lines of credit. Higher credit scores can also translate to lower interest rates, saving you money when you borrow. Taking steps to open a secured or retail card, as well as becoming an authorized user, are just some of the ways you could start building credit fast.