The credit cube consists of three interconnected dimensions: credit report, credit score, and credit history. Knowing the different dimensions of the credit cube can help you understand how the credit system works and how your borrowing and repaying habits are viewed.
The first dimension of the credit cube is the credit report, which contains your credit history. The credit summary shows you all the accounts, inquiries and collections on your credit report. You should thoroughly examine it to see if there are any errors, inaccuracies, or misrepresentations. There are three major credit bureaus: Equifax, Experian, and TransUnion. Therefore, you need to order your report from each of them at least once a year but you may order more frequently if you are planning to get a loan soon.
The second dimension is the credit score. This is a numerical value determined by the strength of your credit report. It ranges between 300 and 850, and everything from your payment history to your credit utilization impacts it. The higher your credit score, the better your chances of getting loan approval, lower interest rates, and credit cards with higher limits.
The third dimension is the credit history. It shows how long you have had credit and how well you have performed in that period. The length of your credit history is measured from when you first got credit. Therefore, the longer the credit history, the better. It also includes relevant factors such as outstanding loans, credit utilization rate and payment history.
In addition, having a good credit score requires the correct use of credit cards based on the amount of credit available to you. Always use your credit card with the available balance in mind. If the percentage of your card’s balance / credit limit is high, it can negatively affect your score. A high credit utilization rate can make it seem like you’re struggling to control your finances.
In conclusion, the credit cube helps you understand many aspects of your credit. If you use the credit cube wisely and follow a practical credit management strategy that aligns with it, you can improve your credit score and control your finances. Understanding the three dimensions of the credit cube, including credit report, credit score, and credit history is one of the foundations of good credit that everyone should strive to understand. With this understanding, you will make the right choices when it comes to finding a personal loan, credit cards, or mortgage loans, therefore keeping you financially sound.
