Whether you like it or not, your credit score matters. It is a three-digit code that follows you. It can affect not only your ability to take out loans and build up credit but it also your personal life as well.
Our lives are full of numbers. There are phone numbers, addresses, weight, height, blood pressure, cholesterol – the list goes on and on. While many people know these figures, one they don’t often know about is their credit score.
WHAT YOU NEED TO KNOW ABOUT YOUR CREDIT SCORE
WHAT IS A CREDIT SCORE
Before we talk about why it matters, I want to explain what your credit score is. Simply put, your three-digit credit score is derived directly from your credit report. It shows how likely you are to repay your debts and do so on time.
WHY DOES YOUR CREDIT SCORE MATTER
Your credit score is vital when it comes to your financial health. It may be just a number to you, but it can make a difference in more than just finances.
1. Used for credit
Most people know that this is the reason a credit score matters. Lenders use this number to determine how likely you are to repay any debts. Lenders, mortgage companies, and credit card issuers all look at your score. The higher your number, the better your chances of being approved for the best terms.
2. Reduced interest rates
When you have a high credit score, you have demonstrated to lenders that you not only repay your debts, but you do so on time. When they see this, they may offer you a lower interest rate. Having a good credit score can save you money, especially when your loan is long term.
My husband and I recently had an insurance audit (if you haven’t done one, I’d recommend you do so). The one thing our agent did was ask us our current credit score. When we told him, he looked at our account and said that because of our high number, we could qualify for their preferred pricing, which would lower our insurance.
In fact, our auto insurance was lowered by so much that we had a credit balance the following month. We even significantly increased our homeowner’s coverage, and our premium went up by only $4 a year!
4. Renting an apartment
If you are not yet ready to purchase a home, you may need rent a place to live. Landlords often run a credit check to see how likely you will be to pay your rent on time. Having a low score may prevent you from getting the place you want. Or, it may require a more substantial deposit or additional fees out of your pocket just to score the apartment you want.
5. Cell phone
If you need a new plan, your cell phone carrier may run a credit check. Your low score might prevent you from getting the phone and the plan you want.
Yes, this is true. Some employers will run a credit check, but they will not be able to see your credit score.
WHAT NUMBER IS A GOOD SCORE?
A common concern people have is if they have a good score or not. This graph shows credit score ratings from lowest to highest. Your credit score number will reflect the type of credit score you have.
It is important that you know your credit score. While you can request a free credit report annually, you will not receive your score. To do that, you will need to visit a site you can trust.
WHERE CAN YOU FIND YOUR CREDIT SCORE
As I mentioned above, this is not provided on your credit report when requested. You will need to use a reputable site to get yours.
Notice that I said reputable. That matters.
While you may see lots of ads for these companies, it can be a bit nerve-racking trying to determine which one to use. While there are many companies out there, one of the simplest to use is Credit Karma.
Before I knew about Credit Karma, my husband had tried another site which offered a free credit score. Imagine our surprise when we saw a small charge hit our credit card the next month. It turns out it wasn’t really free after all! That has made us both pretty apprehensive about trusting anyone to give us our credit score.
I had read many reviews about Credit Karma. With much nervous anticipation, I signed clicked to their site to learn about them. The first thing that popped up was that there was no credit card required. I didn’t even have to enter it! I instantly realized that there was no way they could sneak in and charge me anything.
The thing I do want to point out is that while most lenders check your FICO score, Credit Karma uses TransUnions’ VantageScore. This may mean a slight difference in the actual number, but they are both pretty close.
The next thing I was wondering was how do they make money? They don’t just want to give me my credit score because they are just that amazing. They do make money. The way they make income on their site is simple. They will show you various credit card and home loan offers. If you click on these offers, then they get paid.
The final concern I had was a hard pull on my credit. Every time someone checks your score or your credit, a note is added to your account. The more pulls, the more than hurt your credit rating. Credit Karma does a soft pull. That means it is reflected nowhere on your credit report and can have no negative impact on it.
You can head over to Credit Karma and check out their site yourself. Remember, this is 100% free for you to join (just don’t click on any offers and you’ll never pay a dime).
HOW TO IMPROVE YOUR CREDIT SCORE
If you find that your score is lower than you want, there are a few things you can do:
- Deal with past due debts. If you have old debts, take steps to get it paid off. It may mean setting up a new payment plant or even settling on a reduced amount.
- Get a secured credit card. When you use this card, you will be required to make a deposit. It is security for the lender, just in case you do not pay timely. They have no loss.
- Ask companies to report on your behalf. If you have never been late on your utilities, you can ask them to make a report on your behalf. They do not always do this, but they might. It never hurts to ask.
- Become a co-borrower on someone else’s card. I did this after I had filed my bankruptcy. My mom added me to one of her cards. Her excellent credit helped me to rebuild my own. It also helped me learn new discipline in borrowing and repaying.
I have a few articles which can help you get more ideas to increase your credit score: