Credit scores are more than just a three-digit number you are assigned by a company.
Credit scores play an important role when it comes time to make a big purchase, especially when you need to secure a loan. When lenders are trying to decide if they want to finance you or not, they will look at your credit score. Credit scores tell others about how likely you are to pay back the money they lend to you and how risky it is to invest money in you and/or your ventures.
Perhaps you are wondering what else a credit score is useful for besides getting a loan. The answer is: a lot. Your credit score will come into play when you are looking to rent a home, get a credit card or start a cell phone contract. Some employers will also research your credit report and credit score as part of their hiring processes. Of course, they have to get your permission to do this, but in the end, if your credit is not considered good, then your chances at employment may suffer. Use the following information to understand how your credit score can help you or hurt you.
It is always a good idea to have an idea of what your credit score is. If you know what your score is, you know how to adjust what you are doing. For instance, if your credit score is lower than you would like, then this signals that the financial habits you currently have are not working. This can be motivation to identify certain parts of your finances you could stand to adjust in order to bring your score up closer to where you want to be.
It also ensures you are not blindsided when you go to apply for a loan or an apartment. If you know your credit report is not great and you get rejected, you are at least aware of the problem and can take steps to fix it. Credit scores are determined by many different factors, such as:
It takes time to improve a credit score, so the sooner you are aware of what your score is, the sooner you can begin to implement changes for the better.
Identity theft is more common than you think. All it takes is one incident of identity theft to steal your money and negatively affect your credit scores. If you think your credit score is lower than it should be, this could indicate identity theft or just a simple bureau error. By checking your credit scores, you can also see any credit checks that have been ordered. If you do not remember ordering a credit check that you are seeing on your report, this may signal that someone has been trying to use your identity to apply for a loan or line of credit. It is important that you act fast and contain the situation before it does any damage.
If you do have to file a dispute, you need to submit in writing a list of the problems with your report. You should have copies of all appropriate documentation to support your grievances and be sure to state the nature of the correction you would like to see. Always send in the letter by certified mail and include a return receipt so you have it on file that the credit company did receive your dispute. From there, the investigation is left to the company to take action on. Once the investigation has concluded, you will be notified on the verdict of the investigation.
Perhaps you found a home that is perfect for you and you want to go in for a loan. The better your credit score is, the more a lender is willing to give you. You may also be able to go to your current credit card companies and ask for a higher credit limit or lower interest rates on cards you already own. It is entirely possible to get your rate lowered if you have a high credit score. Checking your credit score ensures you know exactly what your score is when you go in to bargain. Having a good credit score gives you bargaining power.
Getting your credit score is free to do once a year from each of the different credit bureaus: TransUnion, Equifax, and Experian. There is no reason to pass up something free, especially when it can impact your personal life. Just be aware your scores may vary between each credit bureau. The reason behind the variability behind the scores is because each of the three bureaus has its own models to generate the credit scores. Credit scores can also help you check the state of your credit habits, which is something you should be keeping a close eye on.
You should always strive to improve your methods for managing your finances. The better you become at overseeing your finances, the better your life will be, overall. For example, if you see your credit report reveals a high credit ratio, you can take a look at what contributed to that high credit ratio. You can use your credit report to take a look at how much credit you are relying upon and find ways to adjust it if it is too high for your liking.
It also breaks down all of the different lines of credit you have open, how much credit you have taken out on each one, and payment history. With such an in-depth breakdown for all of your trade lines in one place, you can easily see which lines you have used the most and which ones you may want to improve. Do not be afraid to really dissect your score to figure out how to better improve your finances.