We’re constantly hearing about the importance of staying on top of our credit score. But, how is that one number really affecting us? Here are five things you need to know about your credit score and how it’s influencing your finances.
1. There are many factors that determine your credit score.
It’s pretty common knowledge that paying your bills on time will help your credit score, but that’s only part of the big picture. Other factors like the length of your credit history, the variety of credit accounts you have, and the amount you owe on your accounts all have an effect on your credit score.
Some of these elements have more influence on your credit score than others. Stay educated about which factors have the highest impact on your score.
2. Your credit score determines whether you get a loan, your interest rates, and more.
Something else you need to know about your credit score is that lenders, landlords, and employers can all do credit checks. This means that loans, credit cards, apartments, jobs, and other purchases might be hard to obtain if you have a terrible credit score. Interest rates on new accounts you start are also likely to rise if your reports show poor credit. It’s important to determine how your credit score can work for and against you in these situations.
3. It’s important to check your credit reports to make sure your score is accurate.
With that being said, if you’re noticing bad credit scores that seem to come out of nowhere, look into it. Because your credit reports determine your credit score, it is crucial to monitor them. It’s your responsibility to make sure your credit reports are accurate.
Experian, TransUnion, and Equifax are the three big credit bureaus your credit reports come from. You can pull your credit score report from these bureaus once a year for free or request one every four months. Stay on top of your reports, and you won’t be surprised by any changes in your credit score.
4. You can find out what your credit score is for free.
One of the most important things you need to know about your credit score is that you can find out what your current score is for FREE. Many credit card companies and a few websites—such as Credit Karma—will tell you your credit score free of charge. This is helpful if you need a quick snapshot of your current credit situation.
5. You can work to improve your credit score.
One of the things you need to know about your credit score is that if your number is looking less than great, it’s not the end of the world. Whether you have bad credit or no credit at all, there are ways you can work to make big changes.
For example, steer clear of actions that damage your credit score. Late bills, maxed out credit cards, taking on too much credit, and even completely avoiding credit opportunities altogether will all have a negative impact on your credit score. Your best bet is to seek out beneficial credit and use it responsibly.
Staying educated about your financial status is crucial to a great financial future. Understanding these five things you need to know about your credit score is a big step in taking control of your finances
Lorenz Financial Services, LLC is a Lafayette, Indiana fiduciary who offers financial planning and portfolio management services. If you have questions about who we are or our services, please contact us at (765) 532-3295 or email us.