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.
Your credit score is determined by each of the big national credit reporting agencies. You may recognize the names TransUnion, Experian, etc. - these are the bureaus that hold your credit history in hand. Since there are three, that technically means you have three distinct credit scores.
The credit bureaus determine your credit score by examining your credit report and history. There are many different things taken into consideration, such as the level of debt you’ve accumulated compared to your income. They also look at the credit limit you still have available, whether you make payments on time, if you’ve ever missed a payment and more.
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.
Whatever the highest score is, you want to get as close to that as possible. A credit score of 725 or higher will get you approved for a loan. It should also earn you low interest rates. What is considered a good credit score can change with the economic climate as well - the tougher the economy is, the tougher lenders will probably be on approving loans.
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.
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Tags: Credit, credit history, credit report, credit score, free credit score