Understanding the concept of a
credit score is the first step to knowing how long it takes for a credit score to go up after paying off debt. It is a numeric representation of an individual's creditworthiness, based on their credit history. The score ranges between 300 and 850, with a higher number indicating better creditworthiness. Lenders, landlords, and even employers may use a person's
credit score to assess their financial stability and responsibility.
Credit bureaus calculate credit scores using a complex algorithm that takes into account various factors, such as payment history, credit utilization, length of credit history, types of credit used, and recent credit inquiries. Each factor carries a different weight in the calculation, with payment history and credit utilization being the most significant.
A good credit score can open up many opportunities, such as favourable interest rates on loans and credit cards, better insurance premiums, and even better job prospects. Conversely, a low credit score can lead to higher interest rates, loan disapprovals, and difficulty securing housing or employment.