You’ve probably heard of credit cards, and have at least one yourself. In this day and age, credit is very important. It allows you to buy items without having money on hand. Credit can be measured in a variety of ways, and the most common ones you see are credit reports and credit scores. They can determine if you have good or bad credit. So what are they?
Credit scores are a number given to you annually to determine how reliable you are about repaying debts. They are scored by FICO, a data analytics company. Scores are counted from 300 to 850. Generally speaking, the lower your credit score is the more likely you’ll have high interest rates that can cost you thousands of dollars. Anything below 580 is considered Poor. If your score is 580-669, it is Fair. If your credit score is 670-739, it is Good. 740-799 is considered as a Very Good score. And lastly, anything above 800 is Exceptional. Today, most Americans are in the Good range. The closer to Exceptional your score is the more likely there is less risk involved for both you and the lender.
On the other hand, credit reports are a detailed history of your credit. It should contain personal information, credit inquiries, public records, and credit account history. When you use credit, lenders will report it to the three nationwide credit bureaus. The credit bureaus are Equifax, TransUnion, and Experian. Each year, each company will give you a free copy of your credit report. Additional copies can be ordered with a fee. For some people, they order one copy every four months without spending extra money. Others may just order all of them at the same time.
Why Good Credit is Important:
Good credit is important because it often allows you to have a lower-interest loan and also more choices. Lenders like to see borrowers that are good at paying back their money. Thus, keeping your credit score at a high level is important.
You may wonder how you can keep your credit score high. An important thing to remember is to never open more credit accounts than you need, keeping credit card balances low, and paying payments on time.
Then of course, you might also think what might happen if you have a low score. You can always improve it, by using the above methods. They are important facts to remember, and can present a more reliable you to prospective lenders.
Written by Allie Chang