Your credit score can have a big impact on your life. That score determines whether or not you can buy that new car, be approved for that loan or hired by that new company. Anytime you’re speaking to a bank or lender about a loan, they will be pulling your credit history and score.
That means whenever you’re involved with a purchase that requires a loan, someone is pulling your credit score and report. The higher your score, the more likely you are to be approved. You will also probably be granted a lower interest rate than consumers with scores lower than yours.
So what is a credit score exactly and who or what determines what yours is? First off, credit scores are determined by the big three credit reporting bureaus, such as Equifax or TransUnion. That means you technically have three distinct credit scores, though all should be around the same number.
These companies determine your credit score through a variety of factors. Your debt to income ratio plays a roll, as does the amount of credit you have open to you. Your payment history is also a factor, and late or missed payments can have a big affect on your credit score.
From this information, the bureaus are able to assign each consumer a numerical credit score based on their results. Credit scores can range from 0 to as high as 990 depending on the credit reporting agency. Each agency has its own method of assigning credit scores.
Whatever the highest score is, you want to get as close to that as possible. A credit score of 725 or higher will get you approved for a loan. It should also earn you low interest rates. What is considered a good credit score can change with the economic climate as well – the tougher the economy is, the tougher lenders will probably be on approving loans.
Your credit score is like a report card for lenders to look at. It helps them determine your responsibility levels, such as whether you can be counted on to make payments on time. In this day and age, even a job interview is cause to pull your credit history.
Since your credit score can have such a huge impact on your decision making, it’s important to stay on top of it. You should pull your credit report at least once a year, and utilize a free online service to get your credit score. This will help you take care of issues if and when they crop up, ensuring that the next time you’re ready to make a big purchase, you don’t have to sweat about your credit score.
