Whether you sang along or changed the channel, chances are that for at least a few seconds, you were thinking about your credit score.
Much as we like to believe that we aren’t “just a number”, the fact is that when it comes to borrowing money, the numbers are pretty important. Your credit score is a key indicator to a lender as to your ability be able to pay back money that you borrow. It is an impartial metric that helps your financial institution to assess risk and make determinations about your ability to pay back a loan on time.
The majority of lenders will look at your FICO score, which has become the industry standard. Your FICO score is a calculation that takes into account payment history, how much you owe, how established your credit history is, any new debt you’re taking on and the different types of credit that you use. The result of the calculation is a number between 350 and 850. A higher credit score improves your chances of securing a loan and may even earn you a better interest rate.
If you’re reading this and silently cringing, thinking about those late payments or poor credit management you’ve had in the past, don’t panic. A bad credit score doesn’t have to haunt you for the rest of your life; there are steps that you can take to bring your score up. Paying bills on time, bringing delinquent accounts back into good standing and reducing your debt to a reasonable percentage of your income can all have a positive impact on your score.
So how do you find out more about your credit profile?
You are entitled to one free credit report from each of the three national reporting agencies annually. While your credit report does not contain a raw score, it contains information about your credit accounts and your payment habits and serves a good indicator of your current performance.
The bottom line is that when it comes to your credit score, it’s always better to know where you stand. Finding out your credit information several months in advance of a loan application can help you better plan for your financial future and make adjustments to your credit habits if necessary.
Want to learn more about your credit score? Click here to find additional tools and resources.