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Credit Score Overview: What You Need To Know
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.
That means whenever you’re involved with a purchase that requires a loan, someone is pulling your credit score and report. The higher your score, the more likely you are to be approved. You will also probably be granted a lower interest rate than consumers with scores lower than yours.
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.
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.
From this information, the bureaus are able to assign each consumer a numerical credit score based on their results. Credit scores can range from 0 to as high as 990 depending on the credit reporting agency. Each agency has its own method of assigning credit scores.
Typically, a good credit score is anything over 700. A score of 700 or more will get you approved for most practical loans, and net you a decent interest rate as well. The higher your credit score, the better interest rate you are likely to get.
Your credit score is like a report card for lenders to look at. It helps them determine your responsibility levels, such as whether you can be counted on to make payments on time. In this day and age, even a job interview is cause to pull your credit history.
Staying informed of your credit score and report is important given the major effects it can have on your life. There are plenty of free services to use, if you do your research and find the ones that are truly free. No matter what, you should pull your credit report and score at least once a year, to make sure there are no mistaken issues in it. This will ensure there are no surprises waiting when it’s time for you to get that new car or home.
About the Author: Tawana Rashing is an expert credit repair counselor working with consumers to repair and increase their credit score. She is a part time writer for several websites about credit tips, counseling and repair. Her hobbies include gardening, biking, scrapbooking and spending quality time with her family.
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