Most of us understand that a good credit score rating is important, but many of us are still a little bit confused about what we can do to impact our credit score rating. We have a vague credit score sense that if our rating were better, it would expedite approval in the borrowing process and clear the way to more favorable interest rates on loans. But what does it all mean? Here, ScoreSense demystifies the credit score rating and offers tips regarding your credit score.
- First, what is a bad credit score rating? The FICO scale runs from 300-800, and the median consumer average is about 720. Before the financial crisis of recent years hit, 720 was a high enough score to get a favorable interest rate; however, most lenders today require 740 or above. That said, a credit score rating isn’t actually considered bad until it falls below 585.
- Get copies of your reports. While FICO doesn’t offer a free credit score rating, you can obtain credit reports from all three major bureaus once a year, free of charge. Once you’ve seen what’s on the reports, you can contest any errors you find, and then get to work building your credit.
- One simple key to good credit is to borrow only what you can afford. Paying your debts, easily and on time, demonstrates to lenders that you are a responsible borrower. Whenever possible, only charge what you can pay off in full at the end of each month.
- Use as little credit as you can. In other words, strive to keep your balances below 30 percent of your credit limits. When trying to raise your credit score rating, it is important to keep your debt-to-credit ratio low.
- Do not close accounts when you pay them off. Having older accounts on your credit report is favorable, and having $0 balance credit cards raises your creditworthiness in the eyes of lenders.
Having a good credit score rating is important in helping you get the things you want and need. ScoreSense can help you build good credit, by providing you with the tools you need to take greater control of your finances. If you need more information on managing your credit, visit us at www.scoresense.com today.