Why Your Credit Score is Important and How to Improve it
Part 1 of 2 - Everything You Need to Know About Credit Scores
Why Credit Score Is Important
In today's modern era a credit score affects many things including your ability to lease a car, rent a house make large purchases and even become a customer of certain companies. Utility companies such as electric, phone, satellite and even cable will often times check a customer's credit rating. Low credit scores may mean higher deposits before a company will provide service. Many employers check out potential hires credit score to determine whether or not they are a responsible individual. A credit score is not something to be taken lightly.
What is a credit score? How do I find my credit score? What things effect my credit score? If my credit score is low, how do I improve it? These are all important questions and having the answers could mean the difference in renting your next home, leasing your next car or getting a loan for large purchase or in emergency situations. In 2015, your credit score IS your financial identity. It's how you're viewed by companies, employers and banks. Let's make sure you're wearing your best outfit!
What Is A Credit Score?
A credit score is a three digit number that tells lending companies how well you've paid your bills. Lending companies use this to determine your credit worthiness. Your credit score can affect the interest rate you may get on a loan as well as whether or not you are approved.
The most common credit score rating is FICO. FICO scores range from 300 to 850. Those with a score of 740 or higher are typically entitled to the best interest rates. Companies will make certain assumptions based on credit scores. When reviewing a credit score a company can decide whether or not they are going to finance your loan, give you a lower interest rate, or even give you a good deal on your auto or home insurance.
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Assumptions are generally made on the following scores:
Excellent Credit: 781 - 850
Good Credit: 661 - 780
Fair Credit: 601 - 660
Poor Credit: 501 - 600
Bad Credit: below 500
There are certain factors that go into determining your credit score. Things like how often you paid your bills and whether or not you ever been late on a payment. What is the balance on your revolving credit cards? Lenders typically look at whether or not you have a high balance on your credit cards versus how much you have available. This means maxed out credit cards, are NOT a good thing. Utility companies also report to the credit bureaus so keep this in mind.