Your credit score has a profound effect in terms of the interest rate you will be paying when you apply for a home loan, auto loan or any type of personal loan. This is the basis that lenders use to determine if you will be able to make the loan payments in the future. If you need money to pay for college or renovate the home, it is good to know what it means to have a good credit score.
The credit score ranges from 340 to 850. Creditors determine this by reviewing your payment history, amounts that you owe, the length of your credit history, the types of credit you have used and new credit. If your credit score is over 700, then you have a good credit score. This means you are more likely to receive any financing options and better interest rate compared to someone who scored lower. The majority of Americans, approximately 60% of them, have a good credit score. This means that while many of us are doing well, there are others who need to improve theirs. Should you be one of those who got a lower rating, there are ways to improve it.
This can be done by paying off your debts, especially if most of these are reflected in your credit card bill. The best approach is to deal with the credit card that has the highest interest rate first and then work on the rest. Should there be a problem coming up with the money, you must contact your creditor regarding the situation so a payment arrangement can be made before your late payments will be seen in your credit report. Late payments should be avoided since they reduce your credit score.
Although it is nice to have many credit cards, using all of them can get out of hand. The more credit cards you have, the more available credit you have. This can actually work against you when applying for a loan. There are some who know that they deserve a higher credit score than the one that came out in the report. If you feel that there is something wrong, you must call your lender because it is possible that the limit that was reported is much lower than what you are aware of. Should this be the case, it is only right that you have this corrected.
In order to know what your credit report looks like, you can get in touch either with Experian, Equifax or Transunion. These three are individual credit agencies and each of them should reflect the same figures. You should get a copy from one or all three at least once a year to know your current standing since your transactions this year may be higher versus the previous year which could be either good or bad for you. Staying informed about your personal credit will help you determine your budget, improve your credit and make the best possible interest rates available to you for any type of loan you will need.