Why Is Your Credit Score So Important?
Although credit scores can be confusing, it’s still possible to understand them. With several different algorithms and models used, it’s easy to mess up your credit rating and end up with a less than impressive score. Often, this happens long before you realize what’s happened. What You Need to Know About Your Credit Score Credit scores typically get little attention until it’s time to use them for a loan application. That’s when most people find out they’ve ruined it, and worse yet, they have no idea how to make it better. Fortunately, your credit scores are not the only factor considered during the underwriting process, but that doesn’t always make a difference. A low credit score makes a borrower seem like a high risk, spelling the difference between an unsecured personal line of credit and a loan with unaffordable interest rates. In fact, your credit score is one of the most important factors in determining whether you become approved for big-ticket items like mortgages and auto loans, but they can also weigh heavily on the following: · Employment Opportunities - While not every employer does a credit check, many of them do. For positions where you’ll be handling a company’s money, a low credit score can look bad and prevent you from getting the job. · Rentals - Poor credit ratings can make you ineligible for rental properties as well. Low scores make you look irresponsible with money, leaving you to find other means of getting approved. · Insurance Rates - Many insurance companies base their premiums on your credit score, meaning you could pay higher prices for coverage if your profile looks bad. · Utilities - It may be impossible, if not expensive, to get utilities hooked up in your name if you have low credit scores. Many utility companies request a deposit for new accounts, but you can escape that extra expense by having an impressive credit report. It’s important that, regardless of your present needs, you think about the effects of your credit score on the future. Working diligently to keep your credit file clean is essential, as it directly effects your interest rates, credibility, and financial stability. Good and Bad Credit Score Ranges In general, a “good” credit score ranges between 700 and 749. According to VantageScore and FICO, “excellent” scores begin at 750, but “fair” or “poor” scores are on the other end of the spectrum - anything below 699, in fact. Fortunately, unimpressive credit scores don’t always mean you’ll never get approved for the best personal bank loans. Low scores simply mean you need to work harder to get what you want. There are numerous lenders and credit card issuers who are willing to provide financial products and services to consumers with less than perfect credit. However, the APRs are typically high and there are often extra fees associated. Knowing where your current credit scores stand is important. Try to get a hold of your report annually. Getting Your Credit Reports There are numerous avenues through which a consumer can get an updated copy of their credit report. Most of the time, those reports cost money, but sometimes they don’t. The price for your report will likely be determined by the reporting source and the scoring model. However, some credit card issuers offer free credit monitoring services for card holders, and multiple agencies can provide a current report for those who sign up for their programs. The following entities typically give reports to consumers at little to no cost: · Grand Teton Professionals - (a free initial credit analysis is given to potential clients seeking their credit repair services) · Credit Karma - (VantageScores reports from all three reporting agencies are rendered but can only be checked occasionally) · Credit Sesame - (credit scores are only pulled from the TransUnion database) · AnnualCreditReport.com - (you get one free per year from each of the three credit bureaus) Check with your credit card company to see if you can get a regular updated report from the three major bureaus (Experian, EquiFax, and TransUnion). Credit Score Types and Scoring Models When discussing credit scores, it’s often difficult to understand which score is being measured. Most lending institutions use the FICO score. However, it’s important that you’re able to see the same report that your lender is seeing to decrease confusion. Meanwhile, there are other scoring systems used and those systems need as much attention as FICO. VantageScore has a few differences in the way credit is scored, most notably for pay-offs, closed collection accounts, rent reports, and utility payments. This entity also does things differently in terms of reporting credit account usage habits. However, VantageScore does pull data from all three bureaus, so the information is typically dependable. What Has the Biggest Effect on Your Credit Score? Credit scores are used to gauge your risk and pay-back capabilities on loans, lines of credit, and secure or unsecured credit cards. Making on-time payments weighs heavily on your creditworthiness, but other factors are involved as well. Things like your payment history, amounts owed, length of credit history, new accounts, and credit utilization ratio are also important. Finding out that your credit score is lower than expected can be disheartening, especially when it’s due to an error on your report. If that’s ever the case, be sure to notify each bureau online and request that they make the appropriate corrections. Keep in mind, however, that some documentation may be required. Luckily, that is not the only way to increase your credit rating. Aside from regularly getting a credit report to obtain and maintain a good credit score, try the following techniques: · Pay off late fees and missed payments · Get your balanced down to 30% or less · Work on the credit line that’s damaging your rating the most · Pay your bill in full and on time · Limit opening new accounts · Mix up your credit types (unsecured personal lines of credit, personal bank loans, mortgages, secured credit cards, etc.) While monitoring your credit report is rather easy, achieving and maintaining good credit is sometimes difficult. If you find yourself struggling to reach the credit score you want, try working with a team of financial experts.
This article was written by GrandTetonProfessionals.com for FastUnsecured.com. For Sales and Support, please Contact us at 203-518-8071, or email us at: Support@FastUnsecured.com. For Media Relations, please Contact Misty.Burrell@GrandTetonProfessionals.com.