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.
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 agencies determine your credit score by examining a variety of factors about your credit history. Debt to income ratio and credit availability are the big factors. Late or missed payments, bankruptcy claims, disputed debt and more also factor into 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 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.
Since your credit score can have such a huge impact on your decision making, it’s important to stay on top of it. You should pull your credit report at least once a year, and utilize a free online service to get your credit score. This will help you take care of issues if and when they crop up, ensuring that the next time you’re ready to make a big purchase, you don’t have to sweat about your credit score.
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