In the United States, everything depends on your credit score. You should take care of it, because if you don't, it can be hard to get a phone, cable, or gas line hooked up in your home. Some companies also look at your credit score before they hire you. Even if you have the skills to do the job, having a low credit score can ruin everything.
Lenders, such as banks and credit card companies, also look at your credit score. Just imagine that you need a loan to start your own business. If you have a low or bad credit score, you are less likely to get that loan approved, or if you do, the interest rates will be high. When you apply for a credit card, the same thing happens. Before approving your application, a credit card company or bank that gives out credit cards will look at your credit score. If you have a high credit score, you have a better chance of getting the best credit card deals, which include a lot of features and low interest rates on all purchases you make with that credit card.
Even if you want a mortgage, a car loan, or some other kind of loan, your credit score will be a big factor. This is why it's so important to have a good credit score and keep it that way or make it better.
First, you need to know what a credit score is. A credit score is a three-digit number that can range from 300 to 850. This number will be used to figure out how likely it is that you will pay their bills. This means that if your credit score is high, creditors will know you will pay your bills or loan back.
Fair Isaac Corporation, or FICO, is the best-known credit score model in the United States. They use a formula made by FICO to figure out your credit score. The system is mostly used by credit companies and retail banks all over the country.
The following things are used to figure out credit scores:
- How much credit you got recently or how recently you looked for credit This will add up to 10 percent of your credit score as a whole.
- Ways to get credit This can change up to 10% of your credit score.
- Use of capacity This will be worth 30% of how your credit score is calculated. It will show the ratio of current revolving debts to the total amount of revolving credit that is available. If you use your credit card and don't spend all of the money on it, your credit score will go up.
- How long a person has had credit This will count for 15% of how your credit score is calculated.
- Payments made on time This is going to be worth 35% of the total. If you pay your bills on time or before the due date, your credit score is likely to be higher.
Surprisingly, not many people know their credit score, and when they get turned down for a loan or credit card, they often don't know why. You can get a copy of your credit report easily by asking FICO or the credit reporting agencies for it. Every year, they will be able to tell you for free what your credit score is. It is also a great way to find out if your credit report has any mistakes that could be lowering your credit score. You can ask for it to be fixed so that your credit score will go up from what it was.
Always keep in mind that your credit score is a big part of your life. Keep it high, and loans and credit cards will offer you better deals.
