A credit score is that silent little number that can affect many aspects of your financial life, and yet many of us know so little about it.
Whether you are applying for a mortgage, loan or buying a new car, that mysterious little number will determine how successful you are.
So naturally you may be wondering, what is the credit score and what affects your rating?
A credit score is a number that is assigned to you, as well as every individual in the United States, that represents you as a credit risk or not a credit risk.
The higher your credit score, the better your life can be when it comes to buying power, because having a high credit rating can save you a bunch of money in interest payments and you will be charged less. If you have a high credit score, you will be seen as lower risk.
On the other hand, the lower your score, the more you will have to pay.
So it makes good sense to keep an eye on your credit history data especially in uncertain economic times.
How Exactly Does a High Credit Score Help You?
You never know when you might need to borrow for an emergency or when that dream house right around the corner from the best schools in the city will go up for sale.
Therefore, creating and maintaining a healthy credit score is important.
In addition to the terms and interest rates, your credit score may determine whether or not you can even get a loan. Even more recently, landlords, insurance agencies, utility companies, and others have started using your credit score to make decisions that affect your financial life. And even if you are trying to get a better job to increase your income and improve your credit score, your credit score meaning becomes even more important. Many employers now check your credit history before they will hire you.
What Kinds of Things Determine Your Credit Score?
How you have managed your credit in the past is the most important factor. If you have had late payments reported to the credit bureaus, that will negatively impact your score. Of course, a bankruptcy will practically destroy your credit rating for quite some time. Being late with a mortgage payment is especially egregious.
How much debt you already have is right up there in importance as well. Even children know that you can’t pay back a loan if you don’t have enough money to go around. It is a rare person who will go without food in order to pay for shopping sprees, so having a lot of debt will also lower your score.
How long you have been in the credit world?
If you have had a decent credit history for a lot of years, you are less of a risk than a recent graduate who has never bought anything on credit. Of course, if you have had credit for a long time but have run into some situation that has made you miss payments or have had to file a bankruptcy, being old won’t help you.