Learn Everything You Need to Know About Your Credit Score
As an adult, it is important to take the time to make sure that you have the best credit score that you can. There are many people who assume that they do not have to worry about their credit score if they do not plan to buy anything major throughout their life, but that is not the case at all. The following guide provides you with an in-depth look at credit scores and why you should keep yours as high as you can.
What Is a Credit Score?
A credit score is a rating that lets companies know how responsible you have been financially. When you do not make payments to companies or carry a lot of debt, it will be listed on your credit report and could make your credit score lower. It is best to make sure that you pay all of your bills on time, even if you cannot make a full payment. Many companies will not report a partial payment to the credit bureaus, but they will report a late payment.
Why Is a High Credit Score So Important?
When you want to get a loan for something later in life, having a good credit score will impact if you are approved for the loan and the interest rate that you’ll pay. Lenders, like LendingClub, take someone’s credit score into account to determine if they are a high-risk borrower or not. If you are deemed a high-risk borrower, the lender may turn you away or require you to pay a very high interest rate because they want to lose as little money as possible if you stop paying on the loan.
What Affects Your Credit Score?
Many people are very confused about what affects their credit score. They assume that when they make payments to creditors that it will help to raise their credit score, but that is not always the case. Creditors only report when a debt is paid off and when payments are late. It is important to try to pay off a debt as soon as you can so that it can help to raise your credit score.
When you apply for loans, apply to rent an apartment, or apply for credit cards, the companies will run your credit score to see if you are a trustworthy borrower. Every time they check your score, it will cause your credit score to dip slightly. It is best to limit the number of times someone has to check your credit score.
What Is Considered a Good Credit Score?
It is important to know that most people do not have a perfect credit score. In fact, most people don’t even have an excellent credit score. It is best to strive to get your credit score above 650 if you want to have a credit score that lenders would like to see. There are many free online websites that allow you to check your credit score quickly and easily. Knowing what issues are affecting your credit score can help you to make changes to try to raise it.
Once your credit score is where you want it to be, you need to do everything you can to maintain it. Do not take out any loans that you do not need and be sure to pay your bills in a timely fashion so that companies do not need to make a negative report on you.