Everything You Need to Know About Your Credit Score

Today’s guest post is brought to you by Steven Millstein, a financial advisor, who is going to take the mystery out of your credit score for you!  Check out his bio at the end of the post

A credit score is a number that represents your credit worthiness. Your credit score is used by lenders when deciding whether or not you will be approved for credit. Some lenders will utilize both your numerical credit score and the actual information on your credit report.  Other lenders will focus on one or the other.   Ultimately, we all need to know what is considered a good credit score.

Everything You Need To Know About Your Credit Score

Why Are Credit Scores Important?

The reason credit scores are so important is that these numbers represent whether or not you are going to be able to qualify for credit.  Many lenders only use this numerical value so if it is in the lower range there is a good chance that you will not be extended the credit you want or need.

Each major credit reporting agency determines its own credit score based on the information that is currently being reported on it.  This means that each of us could have three different credit scores just like we have three different credit reports.  What does this mean?  That just like our credit reports we need to make sure that we review each of our three credit scores and do what we can to keep them as high as possible.

What is a Good Credit Score?

The credit score values range from 300 to 850.  300 represents the lowest possible score and 850 represents the highest. The following factors are used when calculating your credit score:

  • Number of Late Payments
  • Amount of Debt
  • Length of Credit History
  • Type of Credit Used
  • Number of Credit Inquiries

The higher your credit score, the better your credit score is.  60% of the people in the US reported as having credit scores between 650 and 799.  The average score in the US is about 723.  A score of 660 to 700 is considered fair.  Therefore, a score of 700 and above is considered as good.

Knowing what is a good credit score is extremely important before applying for any sort of loan since so many lenders base loans solely on your credit score.  There are some lenders who will give more rate to your credit score than to your income and a few who will tell you out right that if you have a credit score below a certain number you will not qualify for a loan with them.  Knowing your credit score will let you know where you stand with the lenders and can give you an idea of whether or not you need to work more on checking on the items being reported as part of your credit history.

If you are struggling to get loans or mortgage offers because of your bad credit, you need to find out what your credit score actually is.  Not many people realize what their credit score is and apply for loans, mortgages and credit cards regardless.  Applying for credit when you have a bad credit rating is sure to get you a rejection.  This will make your credit score even worse.  That is why you need to find an absolutely free credit report.

Why you Need a Credit Report?

You need a credit report as it determines what you can and can’t borrow.  Not only this, a free credit report will let you check that you have not been a victim of identity fraud and theft.  It is possible that debt and credit checks that appear on your credit report are not yours. Therefore, a credit check can be used to repair your credit or to make sure you can get credit.  In addition, it can ensure you are safe and protected from fraud.

Where to Find a Free Credit Report?

Some companies will give you a credit report, but they are not always for free. They may charge you a one off fee to receive your credit report or they may charge you a reoccurring fee monthly, quarterly or yearly. If you are getting your credit report because you need to repair your bad credit, the last thing you need is another payment for your credit report.

So you need an absolutely free credit report instead of one that you have to pay for. You can get your free credit report from one of three different companies. These companies are Equifax, TransUnion, and Experian. You will be able to view these free credit reports as long as you can verify who you are. Once you have verified your identification, you can the view your credit report online.

Which Credit Bureau Report Should You Get?

Some people think using one company to get their credit check is enough. You really need to be looking at all three because they may show different things and you may be able to spot anomalies on your credit score. You can only get your free credit score once a year from each company. Instead of getting all three at once and then having to pay to look at other ones get your credit report from one company per quarter. You can alternate which company you look at so that you keep ahead.

However, there are certain circumstances that you can get more than one per year. If you have been denied any credit request, you can get your credit report within 60 days of the denial.

Finally, you can obtain your free credit report from all three major credit bureaus here: https://www.annualcreditreport.com.

 

Author Bio: Steven is a personal finance guru with more than 20 years experience helping individuals and families improve their financial situation. Make sure to visit his personal blog, Credit Zeal, for free help and advice with credit repair and debt management. You can also follow him on Twitter or Pinterest. 

 

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4 comments

  1. Yes! These are the things I wish I would have known when I first went out on my own. Your credit score is super important, even if you think you’ll never need it. This exactly what I will be teaching my son so when he’s an adult, he can make smarter decisions!

  2. I feel like this is the most overlooked aspects of personal finance. It’s unbelievable how much money a 1% difference in your interest rate can save you on a mortgage, and your credit score is 100% responsible for that. Great post!

    1. I def agree with you! It may not sound like much but when you’re talking about a home that is 100k or more, it is a lot of money!

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