Are you thinking about applying for a mortgage or buying a car? Either way, you need to know your credit score. But what is a credit score and why does it matter? Is there anything you can do to improve your score? Keep reading to find out.
Why does my credit score matter?
Lenders heavily consider your credit score when they evaluate you for a loan. Your credit score helps them evaluate your financial situation. Do you have the means to pay off your loan? Do you make payments on time? A credit score helps a lender know if you qualify for a mortgage or a house loan.
A good credit score can make the lending process easier and get you lower interest rates. Not only does your credit score matter if you want to buy a new car or get a mortgage, but your credit score could also discourage potential employers or make it hard for you to rent an apartment.
How do I check my credit score?
So you know your credit score is important, but how do you check it? There are multiple methods and ways when seeking how to check credit score. There are a lot of options when it comes to getting your credit checked, and some offer different things than others. When interested in checking your credit, contact a professional.
How do I improve my credit score?
The data used to calculate your score can change, but there are a few major factors to improving credit score. Here are 3 tips to help improve your credit score:
1. Your Payment History
Do you make payments on time or are you always late? If you want to improve your credit score, it is important to avoid missing payments or making late payments. It is very important to make your payments on time when building credit.
2. Your Debt to Credit Ratio
When improving credit score, your debt to credit ratio is important. When your credit score is calculated, agencies look at the amount of money you owe and compare it to to your credit limit. In general, financial advisors recommend keeping the amount owed under 20% of your credit limit.
3. Your Credit History
Some people are surprised to find out that after years of responsibly handling their finances and avoiding debt—they don’t always have a good credit score.
Learn to responsibly use credit. Use your credit card in a good and safe way to build credit.
Agencies will also consider recent applications for new credit when calculating your score. In general, applying for a new line of credit will cause a dip in your score since it means you are planning on incurring more debt. This doesn’t mean you have to avoid any new accounts, but it is important to take caution when applying for a new line of credit and how many you apply for. As you use your new account responsibly and establish a history of making payments on time, your score will improve.
Your credit score doesn’t have to be a mystery—get to work improving your score by making payments on time, managing your debt to credit ratio, and establishing a responsible credit history.