Credit Score Basics Everyone Needs to Know
Your credit score is very important for your future. You need a good score to apply for car and home loans, as well as many other factors that influence things like future credit cards and interest rates. To have a good credit score, you need to understand how it works and how you can work to show yourself as an optimal trustworthy consumer!
What is a Credit Score
A credit score is a number that determines your creditworthiness. This gives institutions insight on if you will default on your debt or can receive new credit. Essentially, this determines if you can be approved for loans or credit cards, and what interest rate to give. Your credit score will be between 300 and 850. Lower scores are considered “bad” while numbers 600 and greater are “good” credit scores. Your credit is determined by companies such as FICO and VantageScore Solutions.
Why You Need a Good One
A good credit score is important, as it will certainly affect your finances. When you have good credit, your interest rate on credit cards and loans is lower. You will qualify for the best rates because your number indicates you will pay your debts. You will also be able to increase the limits on how much money you can get in a loan. A good credit score is critical during the home buying process. This will ensure you can qualify for the mortgage as well as getting a good interest rate, keeping the costs for your home lower.
How to Improve It
An important way to improve your credit score is to know what it is. There are multiple companies, so check from a couple different places. When you have payments that are due, paying them on time will help to increase your credit score, whereas late payments can bring your score down. Your credit utilization rate is also an important factor to improving credit. If your utilization rate is lower, your credit score will improve. Applying for new accounts can also bring down your score, though having multiple accounts for a long time will eventually do the opposite. So, make sure not to open new accounts too often, and research if you are a good candidate to be approved.
Your credit score will be an important thing in your life. There are big purchases you may need to make which you need to borrow money, such as a car or home loan. Having a good credit score will be a good indicator that you will be stable financially.
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