The three numbers that make up your credit score can have a significant impact on several areas of your life. While most people understand the importance of having good credit, not every consumer is aware of just how many people will view this number in your lifetime. If you have bad credit or no credit at all, you have undoubtedly run into trouble getting approval for credit or good terms on the credit for which you are approved. Here we look at the importance of your credit score and how you improve your score to better your life.
What is a credit score?
Your credit score is a three digit number that is determined by several factors. Information reported to the credit bureau is reflected on your credit report. Both your credit report and credit score are considered when potential lenders review any applications for credit. Their are different types of credit scores with the main score used by lenders being the FICO credit score. Another credit score that may be reviewed is the Vantage score. Both use similar but different scoring systems with a different range of numbers. Your FICO score can range from 300 to 850 while the Vantage score has a range from 501 to 990. In both cases, the higher the number the better your score. Vantage scores are also graded from A-F with A being the best and F being the worst. In this economy, it is imperative to have the best score possible as it will determine whether or not you are approved for credit as well as the terms you will be offered.
Who looks at your credit score?
As previously mentioned, lenders are the main people viewing your credit score, however they are not alone. Potential employers may request this information as well as insurance companies and even utility companies. Your credit worthiness is important to all of these individuals and your credit score is a direct indication of how much of a risk these companies or individuals take when doing business with you.
Ways to improve your credit.
There was a time when having average or “ok” credit was enough to get approved for financing however that is not the case today. To improve your credit score you have to manage your finances responsibly. Pay all of your bills on time each month and work toward eliminating any debt you may currently have. By showing that you are responsible enough to meet the terms of your past and current financial obligations you show future lenders that you are not a risk to them. Lenders also like to see when an applicant has available credit but they do not utilize all of it. For this reason, reducing your current debt will not only improve your credit score, but also improve your financial situation. If you do pay off current credit cards, think twice about closing the accounts as your credit score is also determined by the length of time you have had credit. Having a good credit score is important and each consumer should work toward building or protecting a good credit score.
Where to Get Your Credit Score
If you want a more complete look at your credit score, you will have to pay for it. The major credit bureaus offer packages that include credit scores and credit reports from all of the bureaus. This can cost between $40 and $70, depending on which products you purchase. You can, however, usually get just a score from one of the bureaus for between $7.95 and $10.95. You can also go to MyFICO.com and purchase your score. MyFICO offers the score from Fair Isaac Co. Most lenders use a formula based on the FICO score to create their own scores.
Other paid services include CreditReport.com or Equifax Score Power. These companies will give you a free trial initially, but then want to sin up to a monthly subscription. You can get your score and cancel the service. Just don’t do it too often. Moolanomy offers some other good tips on how to get your free credit score online, too.