Everything you do in life adds to your reputation – and your finances are no exception. The difference is, instead of word of mouth among your peers and business contacts, your credit score is recorded in black and white for any potential creditor, landlord, employer, or insurer to access.
That’s why it’s important to protect it, and to keep it accurate.
Your credit score tells everyone how you’ve handled your finances for at least the past 7 years. The better you’ve done with paying bills on time, and the lower your debt level in relationship to your income, the better score you’ll have.
The better score you have, the better for you when you want to borrow money. Higher scores get you lower interest rates, longer pay-off periods, lower fees, and less paperwork when attempting to get a loan.
Low scoring applicants are often rejected completely, or offered high interest rates, high minimum payments, and more fees. Why? Because they’re considered a poor risk. Creditors get all they can up front because they know that a person with a low score is more apt to default on the loan.
What’s a good score? Scores range from a low of 300 to a high of 900. 650 or higher is a good score and will usually earn you the best terms when applying for a loan. 620-650 is still considered “pretty good” and indicates a few minor problems with your credit history. You’ll get a little higher interest, but not too bad. Scoring under 620 puts you into the risk category, and the lower it gets, the bigger the risk. You may still get a loan, but don’t count on it.
Things that affect your credit score are:
• Your payment history
• Debt to income ratio
• Debt relative to credit card limits
• A long history of revolving debt
• Credit inquiries
That last one is something you can and should control immediately. If you’re shopping for a new car, for instance, do not let every car dealer run your credit. Refuse to discuss the financing and do not hand over your Social Security number until you’ve chosen the car you want and come to an agreement on the price. Ditto for furniture stores, appliance stores, etc.
Additionally, don’t respond to every credit card offer that comes in the mail. It might be fun to have a wallet full of cards you’ve never even used – just in case. But they will come back to bite you. Multiple inquires indicate that you are about to start spending way over your head – and that’s a red flag that can and will lower your score.
CreditScoreQuick.com
