We often do not think much about our credit scores. After all, if you have money, what do you need to know about your credit score? Actually your credit score could be costing you thousands of dollars on a car loan or mortgage. Many people underestimate the true cost of a low credit score. They also don’t realize that credit scores can be used by creditors and non-creditors to determine how they will handle your purchase.
Credit score facts
Believe it or not, your credit score directly influences the interest rate credit card companies will offer you; a higher rate is tied to lower credit scores. Additionally, insurance companies, landlords and utility companies use that score to determine if you need to put down a deposit or what type cell phone plan you are eligible for. You might be familiar with credit scores from the three credit bureaus (Equifax, Experian and TransUnion), but scores are available from many sources. Credit scores from the three credit bureaus use either FICO or VantageScore. Like FICO, the current VantageScore 3.0 model ranges scores from 300 to 850, an update from its old range of 501 to 990. A new model for assessing credit scores uses trended data. People who are paying down their loans receive a higher score than those who just pay the minimum balance.
Impacting your score
Think again before running up that credit card balance, missing a payment or declaring bankruptcy. It is so much easier to lower your score than to raise it. If you miss a few payments, it might take years to get your credit score to a comfortable level. Inaccurate information can influence your credit report. It is up to you to make sure your credit report is accurate. You should check it once a year at www.annualcreditreport.com or call 1-877-322-8228. You must comparison shop for credit. Just look at credit card offers you receive to see the different rates that you are being offered. You should take the time to shop around for better mortgage, credit card or loan rates. Be cautious of credit repair companies. They often charge high rates for something you can do yourself. If you feel that you are over your head in debt, talk to a certified credit counselor, who is qualified to assist you to improve your credit.
Test your credit score knowledge at CFA and VantageScore’s creditscorequiz.org and learn more.