If you're like most people, you probably already know that your credit score is an important tool in determining your financial stability. As a general rule, the better your credit, the more likely lenders will be to lend you money because of a proven track record of paying it back on time.
When credit is bad, however, you may find that you're limited not only financially, but in other areas as well.
Your credit score is a number calculated by a number of factors that predict your risk factor in repaying your loans and bills on time. The most commonly-used credit score is the FICO score, a number between 300 and 850. Each person has three scores—one from each of the major credit reporting bureaus, Experian, Equifax, and TransUnion.
Your credit score is determined by the following factors:
You can learn more about your credit score and the determining factors here.
Generally, "good" credit scores are scores of 700 and above, "average" credit includes scores of 650 to 700, and anything lower than 550 is considered poor. In order to get the best interest rates for loans and credit cards, the higher the score, the better. People who have poor credit scores might be denied a loan altogether, or may have to pay exorbitantly high interest rates.
Many people think good credit is only important if you're applying for a loan. However, good credit is a determining factor in a number of situations, some of which you might not expect. Here are a few of the things a good credit score can help you with:
Good credit is important not only for being able to purchase a home and vehicle, but it can also affect your ability to rent a home, find good rates on insurance, and even get a job. If your credit is less than stellar, start today to raise your score to help you overcome the obstacles of bad credit.