Your Credit Score Matters

It is probably not something you think about in your everyday life, but your credit score is important to you in more ways than you think. Everything from the obvious, like loan approvals and credit rates to things that may not be so obvious like insurance rates, all depend on your credit score.

Your credit score is a number calculated based on several variables that are constantly changing (payment history, available credit, outstanding credit, the age of credit among many other things). This number is usually between 300 and 850. The higher the number, the better. Your score will be in one of the following groups:

Anything from 300 to about 580 is considered bad. If you are in this range chance are you have defaulted on loans and/or have declared bankruptcy. It will be difficult to get approval for a loan. You may try looking into getting some financial advice to improve your credit score.

If you fall between and 581 and 670 you have fair credit. You will find it easier to get a loan (but not necessarily easy), however, your interest rate will not be the best. Your credit score is here probably because you missed a few payments on loans or credit cards.

671 to about 750 is good credit. You are about where most Americans fall. Generally, you pay on time and are a good risk to lend money to, from a lender’s perspective. You will get good, but not great interest rates.

Excellent is a 750 or above. This is the range where you will get the best interest rates on loans. You have a history of paying your debt on time and not extending your credit beyond 30% (the limit most banks look to see before getting concerned). The trick here is to maintain this level. If you are in this range, you have probably spent some time making sure you are on the right track.

We all know that when you apply for a loan or a credit card, your FICO score is used to determine if the lender will extend credit to you and if they do, how much interest will be charged to the loan. Many people think this is the only place your credit score counts, but that is not true. If you want to rent an apartment, your credit score can be used and to determine your rates on insurance,

No one likes paying more than they must for anything. When it comes to anything you need a credit check for, the higher the score, the better the rate.

As you can see, your credit score affects things in your life that you may not have thought it did. This is a major reason you should keep an eye on it and make sure to keep your score as high as possible. If you do not have excellent credit, don’t think that you are scarred for life though. Your credit score changes constantly. That is a good and a bad thing. If it is not great now, you can work on improving it. Some things only time can fix, like having bad marks on your report, or applying for too much credit in a short time (general rule is no more than 2 times in a two year period), but others you can actively work at, like paying off credit.

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Till next time

Vin

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