A loan credit score is a determining factor for a loanee on his eligibility to obtain loans. It is a score within the range of 300 and 850. It is obtained from factors like payment records, degree of investment, amount of open accounts, etc.

According to the Fair Isaac Corporation (FICO), 500 is deemed as a poor credit score for a creditor to consider giving a loan. Scores of at least 700 are advisable, as they put a borrower at a better advantage.


Factors That Determine a Credit Score

1. Payment History: This factor reveals that a borrower has been paying his deficits on time. This factor is very crucial, as it accounts for 35% of the entire credit score.

2. Duration of Credit History:  This factor serves as scrutiny to a loanee’s payment history. It accounts for 15% of the total credit score. Longer histories can give some advantage. This is due to a large amount of data to work within the history.

3. Overall Debts: This accounts for 30% of the total credit score. It shows the number of outstanding loans and the credit utilization rate of the borrower.

4. Category of Credit in Use: This factor reveals if a borrower has a combination of instalment credits, like mortgage loans, car loans, and revolving credit. It accounts for 10% of the overall credit score.

5. New Credit: It accounts for 10% of the score. It makes credit inquiries on how many new accounts the borrower newly applied for, the number of new accounts he has currently, and the time the most recent account was created.

How Credit Scores can be Improved

For an individual whose credit score is relatively low, there are several ways to ensuring it is fit for obtaining a loan. They are listed below:

1. Review Your Credit History: Credit histories can help to put your credit score in check. It is obtained from the regulatory credit bodies. Errors and score killers can be eliminated. A blend of different credit card and loan amounts can help.

2. Pay Your Bills Early: Seeing that payment history takes the lion’s share of credit scoring with 35%, completing payments of bills very early and responsibly can put up one’s credit score. This can be achieved by keeping track of monthly bills digitally or in written form. It can also be done by setting reminders and even automating bill payments from one’s bank.

3. Aim for less than 30% Credit Utilization: Credit utilization is the second highest factor in determining one’s credit score. A very effective way of keeping credit utilization low is by paying credit balances in full for every month. Let the remaining balance be at most 30% of the credit limit.

4. Make Less Hard Inquiries: Hard Inquiries refer to applications for new credits and credit cards, an auto loan, a mortgage, etc. They tend to affect credit scores especially when many are inquired within a short period of some months. It could also imply to banks that such an individual is in a financial crisis and in dire need of money, and this poses such an individual as a danger to the bank.

Soft inquiries on the other hand have no negative effects on credit scores. They include running a credit check by one’s self, a prospective employer, financial institutions, or credit card companies.

5. Increase a Thin Credit File: Thin credit files are for people who do not have enough credit history to make a credit score. A software program can be used to get their credit scores by retrieving details that are not in their credit report, like utility bills and banking reports, and calculating them according to the FICO model. It has no cost of usage and can only work for people who have good payment histories.

Another program is the ultraFICO program that uses one’s banking history to create a score. To have a score, the following requirements must be met, which include, the bank account must have been in constant use, no delays on past payments of bills, and not having overdrafts.

For renters, rent histories can contribute to having a score. This service however comes with a charge.

6. Do Not Close Old Credit Accounts: Old accounts tend to have more advantages. Closing credit old accounts tend to harm the credit score, increasing the utilization ratio.

7. Make Sure To Solve Every Account Issue: Accounts with delinquencies should be resolved. Outstanding payments should be paid in full, to avoid low credit scores. Making payments up to date will not change records of delayed or missed payments, but it can make positive effects on the credit score with new and better records.

8. Monitor Your Progress:  Account progress can be tracked using Credit Monitoring Services. Many of them are usually free. They monitor activities in one’s account, and they take care of fraudulent activities, thereby keeping the account secure.

9. Improve Your Credit Line: A rise in credit card lines can be applied for. It is usually approved for qualified accounts. However, after approval, it is advised not to spend that account, to have low utilization of credit.

10. Work With Efficient Credit Repair Companies: Credit repair companies make negotiations with creditors and credit agencies to raise an individual’s credit score. It however requires a monthly subscription.


GIFTCARDSTONAIRA is a registered gift card trading company established in 2017 dedicated to providing a world-class trading experience to people in Nigeria and Ghana. Integrity, dedication and excellence in value have been the pillars on which our company hinges its practices and policies.

Leave a Reply
