Your credit score can make a huge difference in your finances, even if you aren’t about to buy a house. A good score can save hundreds of dollars on your auto insurance premiums, credit card interest rates and auto loan, in addition to your mortgage. A bad score can make it tough to get a loan, buy a cell phone, rent an apartment, or even get a job. Here’s what you need to know:
What is a credit score? It is a numerical summary of the information in your credit report that shows potential lenders the likelihood that you’ll pay back your loans. Most lenders use a credit score called the FICO score, which ranges from 300 to a top score of 850. You generally need a score of 760 or higher to get the best rates.
What affects your credit score? More than one-third of your FICO score is based on your payment history. The later you are with your payments, the more points you lose. Another 30 percent is based on how much you owe, and the rest is based on the length of your credit history, new credit, and the types of credit you use. Your experience with credit cards counts for more than your history with car loans and mortgages. More about FICO scores.
What’s the easiest way to improve your credit score? Pay bills on time, use less than 25 percent of your available credit ($2,500 on a card with a $10,000 limit), don’t open too many accounts, keep old cards with a good credit history, and check your credit report. You can order a free report from the three credit bureaus every year where you can also buy your score for about $7.
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Each person in the United States has a credit score. This score is intended to indicate how risky of a financial gamble you may be. There are three credit reporting agencies that each develops their own scores. Lots of different factors impact credit score. You are able to change your credit rating -- it just takes time and specific action. I found this here: The basics of a credit score
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