Credit Score Overview: What You Need To Know
Your credit score can have a big impact on your life. That score determines whether or not you can buy that new car, be approved for that loan or hired by that new company. Anytime you’re speaking to a bank or lender about a loan, they will be pulling your credit history and score.
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.
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.
Using this information and more, the agencies assign you a number that basically says how financially responsible and stable they think you are. Credit scores can be as high as 990, though it differs from agency to agency. Each agency has its own algorithm used to determine individual scores.
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 can tell a lender or other inquirer a lot about you as a consumer. It lets them know whether you pay your debts on time, or whether you have any buying or credit history whatsoever. Even potential employers ask permission to pull your credit report and score to determine whether you’re eligible for employment.
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.
About the Author: Tawana Rashing is a debt counselor and credit repair specialist working with consumers to improve their credit score. She is a part time writer for a variety of sites about credit tips, counseling and repair. Her hobbies include gardening, biking, scrapbooking and spending quality time with her family.
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