It’s amazing how big an effect three little numbers can have on you, but make no mistake, your credit score is one of the more important numbers you’ll be associated with throughout your life. Your credit score can affect just about every major buying decision you make, from applying for credit cards, buying a car, even buying a home! Most lending institutions will examine your credit score and history to determine your lending eligibility.
Lending institutions have to examine your credit score and financial history to determine whether they should risk loaning to you. The higher your score, the lower a risk you are for missed or late payments. Also, high scores give financial institutions wiggle room when it comes to fair interest rates.
Lets back up a second and take a look at what a credit score is and who comes up with them. Your credit score is determined by one of the big credit reporting agencies, such as Equifax. There are three major agencies, which means you get three different credit scores, though they should all be in the same ballpark.
These companies determine your credit score through a variety of factors. Your debt to income ratio plays a roll, as does the amount of credit you have open to you. Your payment history is also a factor, and late or missed payments can have a big affect on your credit score.
Taking all this information into account, the big bureaus then assign you a credit score - which is really like a grade. The highest you can hope for is 990, but consumers with perfect scores are hard to come by. In fact, not every agency’s credit score measurement is as high as 990. Some stop around 850.
Ideally, your credit score should be over 750. A credit score that high ensures loan approval and low interest rates. Depending on the economical climate of the times, anything over a 650 might net you approval and fair interest rates. The higher your score though, the better rate you’ll get.
Your credit score paints a picture of you as a consumer to any company pulling it. It gives them an idea of how responsible you are with your money and paying debts. It even gives them an idea of how early on you began building up your credit, or if you haven’t at all! You may even have to allow potential employers to pull your credit score and history nowadays.
Given how important a credit score can be, you should find ways to keep on top of your credit score and report. Many sites online offer free trials so that you can pull your score and report without paying. It’s important to do your research on these sites though, and not get sucked into paying for information you can get for free. Keeping on top of your credit score will allow you peace of mind the next time a big buying decision pops up.
Tags: Credit, credit history, credit report, credit score, free credit score