I don’t know about you, but I see lots of commercials about finding out your credit score. They talk about what your magic number is and whether it’s good or bad or ugly. But, what the heck is your credit score, what does it mean and, most importantly, how does it affect your life.
What is your credit score
It’s a number assigned to you that stands for how likely you are to pay back money you’re loaned and how financially reliable you are.
It’s just an indicator to your potential creditors. No big deal, right?
How does your credit score affect your life
It rules your financial life. Unless you never want to own anything, rent anything or get a job. 🙂
No way to sugar coat it.
Your credit score will determine what you can and can’t buy and when. Everyone looks at this number ~ creditors, rental agencies, even some jobs.
Am I freaking you out?
Look, calm down. It’s important, yes, but the good thing is, you can change it and it’s not that hard.
The best thing to do is to keep your credit score up in the first place by
- paying your bills
- paying your bills on time or before they’re due
- not applying for every credit card that every tom dick or harry offers (“Would you like a 10% discount on your purchase today by opening this credit card, Mrs. Suchandsuch? It’ll just take 5 minutes.” Say NO! ..and run away screaming, ’cause that would be funny)
- if you have debt (and who doesn’t), pay it down
What does your credit score tell lenders?
Your credit score is telling a bank or a rental place or an employer whether you’re financially reliable (or not.) Should they take a gamble on you? Are you worth the risk?
For example: They figure if you don’t pay your credit cards on time or if your debt balance on those credit cards is too high, then you probably won’t or can’t pay a mortgage on time, if at all.
Credit scores range from 300 to 850. The higher your credit score, the lower your interest rate on loans and the more likely you are to get a loan (rent a house, get a job..). The lower your credit score, you guessed it, the higher your interest rate, if you get a loan at all.
From Experian (credit bureau):
800 +: Indicates an exceptional FICO Score and is well above the average credit score. Consumers in this range may experience an easy approval process when applying for new credit.
740 to 799: Indicates a very good FICO Score and is above the average credit score. Consumers in this range may qualify for better interest rates from lenders.
670 to 739: Indicates a good FICO Score and is in the median credit score range. Consumers in this range are considered an “acceptable” borrower.
580 to 669: Indicates a fair FICO Score and is below the average credit score. Consumers in this range are considered subprime borrowers and getting credit may be difficult with interest rates that are likely to be much higher.
579 and lower: Indicates a poor FICO Score and is considered to be poor credit. Consumers may be rejected for credit. Credit card applicants in this range may require a fee or a deposit. Utilities may also require a deposit. A credit score this low could be a result from bankruptcy or other major credit problems.
What do you do now?
Check your credit score and request your credit report. Contrary to popular belief, checking your own credit score does not ding your credit score, as long as you get it from a reputable source.
Under federal law you are entitled to a copy of your credit report every twelve months. To obtain a free credit report go to www.annualcreditreport.com. There, you can get your credit report from all three credit reporting agencies – Experian, Equifax and TransUnion – once every 12 months.
There you have it, right from the horses mouth (wait, that’s equestrian.) Anyway, what do you do with your credit report once you get it and how do you improve your credit score if it sucks?
Don’t know? I’ve got ya’ covered!
Here is a handy dandy list of what to do with your credit report and things you can do to improve your score. It’s FREE! So, go get it!
I’d love for you to come back and tell me how it worked out for you and please, if you have any questions, leave a comment.
Do you already know your credit score? Do you monitor your credit report?