We’ve all heard how important it is to have a good credit score, but many people don’t know exactly what a credit score is or how to work towards improving one. Having a good credit score is a lifeline for your future, so it is very important to know what a credit score is, how it can be positively and negatively impacted, and why it is so important to everyone. Take a few minutes to brush up on your knowledge of credit and how you can improve yours.
What is a Credit Score?
Credit scores have the ability to affect a lot in your life, so it is crucial to know what a credit score means and what yours is. Credit scores are a financial tool that determines each individual’s creditworthiness. A credit score is a number between 300 – 850 that is based on your credit history. The higher your credit score is, the more worthy you will appear to a lender.
Your credit score changes as you make decisions which affect your credit. A bad credit score could result in a higher payment or missing out on a purchase you’d like – such as an apartment, loan, credit card, insurance premium, vehicle, etc. You may be asking – What if I do not have a credit score? Not having a credit score means you have not tied anything to your credit profile. This can often be a bad thing as you have no history of good credit or debt payment to a lender.
What Does Your Credit Score Impact?
Your credit score essentially affects your financial life. There are many good and bad ways to affect your credit. Your credit score plays a huge part in a lender’s choice to offer you any sort of credit. A credit score may also impact a deposit you may make on services, utilities, phone services, rental properties, and more. Your credit score will also impact your interest rate or credit limit.
What Impacts Your Credit Score?
Your credit score is impacted by five main factors that are evaluated when you take out credit. The five factors that affect your credit score are: payment history, the total amount owed, the length of credit history, the types of credit, and new credit you use. Your credit score is reported and updated by credit reporting agencies in the United States.
How to Improve Your Credit Score
There are many ways to improve your credit, so if your score is on the low end, do not worry! Here are 4 ways to increase and improve your credit score:
- Pay your bills on time – on-time payments for six months will positively affect your score.
- Use a credit card to make everyday purchases, then pay the card balance in full at the end of the month.
- Don’t close your credit card account – stop using the card rather than closing it this could negatively impact your score.
- Take out a line of credit and make consistent payments on time.
Why is Your Credit Score Important?
As you can see your credit score is very important when making purchases or obtaining credit. Having a good score can affect you in many ways as you grow, so if it is low, it is important to work on growing the number. An excellent score ranges from 800 to 850 with a poor score at 300 to 579. The middle range can be considered very good to fair and can affect quite a bit, even if you are a few numbers off from the next range.
As we have you thinking about your credit score, please reach out to Mayville State Bank to discuss where you are at and how our services can positively impact you.
