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Credit Score |
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Your credit score is a 3-digit number calculated off the information in your credit report. Your credit score is integral in helping lenders determine how much of a credit risk you are. Basically, a low credit score indicates that you present a higher risk of defaulting on your debt obligations than someone with a high score.
Credit scores range from a low of 300 to a high of 850. If your’s doesn’t register near the top, you’ll probably never be offered the best interest rates or the lowest insurance premiums and you might even be passed over for a job.
If on the other hand, your credit score is near the top, you’ll definitely reap the benefits. Those who issue credit will clamor for your business. They’ll make you the best offers they can to get your business. If you’re not happy with what you’re offered from one, you’ll likely get a better offer from someone else, if you shop around. You’ll have the upper hand because you’ve proven that you can responsibly manage your credit.
The formula used for calculating your credit score is complicated and not many people understand all that’s involved. That’s okay. What’s important is to know how to keep your credit score in good standing. First in line of importance is paying every bill you have on time. Notice of a late payment on your credit report can cause a significant drop in your credit score.
And so can opening a lot of new credit accounts in a short amount of time. Even if you don’t abuse them, the possibility that you could potentially charge each one up to the limit is a serious red flag to lenders.
Another way to keep your credit score from dropping is by having low balances. The higher your debt-to-credit limit ratio, the lower your score. And as tempting as low-interest balance transfer offers are, paying down your debt is better than moving it around.
Longevity helps boost your credit score too. The longer you’ve been establishing a favorable track record definitely helps as do accounts that have been open for many years and that are in good standing.
If you’ve had problems in the past, it’s possible to reestablish your credit history and by doing so get your credit score moving in the right direction. It’ll take time, determination and responsible credit usage, but in the long run, it’ll be worth your efforts.
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Credit Card Definitions > A - E > Credit Score
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