Your credit score is a statistical valuation that evaluates your creditworthiness as a consumer. It is based on your credit history and lenders of all...
Your credit score is a statistical valuation that evaluates your creditworthiness as a consumer. It is based on your credit history and lenders of all sorts use it to check how good of a debt payer you are. This score ranges from 300 to 850. The higher your score is, the better as it means you’re more financially trustworthy as a consumer.
Factors That Can Affect Your Credit Score
According to Investopedia, there are five factors considered to be the most significant components of your credit score, and these are the following.
- Your Bill Payment History – amounts to 35% of your credit score
- Amount Owed – amounts to 30% of your credit score
- Length Of Credit History – amounts to 15% of your credit score
- Credit Types In Use – amounts to 10% of your credit score
- New Credits – amounts to 10% of your credit score
So Why Does Your Credit Score Matter?
Your credit score and report can haunt you for the rest of your life and can play a huge role in many of your financial decisions and situations. Remember your score whenever you come across the following situations.
Getting Approved For Loans
When applying for a mortgage, a car loan or even a personal loan, your lender will check on your credit report and score. Whether you’re applying for conventional loans or FHA Loans El Paso, a personal loan or a car loan, it is worth cleaning up your credit history and working your way to improving your score before application.
When Purchasing Insurance
When you try to buy any insurance – be it a homeowners insurance to getting your car insured, your FICO score will play a role on your purchase. Insurance companies will create an insurance score based on your credit score. The higher your credit score is, the higher your insurance score will be. And the higher the insurance score, the more you’ll have to pay in premium.
When Applying For A Job
It may be a controversial practice, but yes, some businesses do run a credit report check on their applicants before hiring. The reason is simple – how you handle your finances makes as an excellent determining factor on how you will manage your job. While there are many reasons why your credit score dropped like events that are entirely out of your control, it is something worth pondering in.
When Renting Out Apartments Or Houses
Some landlords do a credit check before allowing individuals to rent on their properties. You might end up having to pay up-front rental payments if you have a bad credit history.
When Applying For Credit Cards
Credit card companies will want to make sure their consumers can pay off their debts, thus this credit report and score checks before approval. If you do qualify despite having bad credit, you may end up having to pay higher annual fees and interest rates and lesser perks.
Good Read: 7 ways to improve your credit score
It is worth knowing how your credit report and score can affect your life in so many ways. In a nutshell, the better you score, the better deals you get and the bigger your chances of snagging a loan.