Anyone with a credit card, auto loan, student loan or mortgage.. What your score is and how you use credit every day should be just as important to you as it is to the many other people who know your score and use it for their own purposes.
Your credit score provides an indication of how likely you are to make payments on time and if you will responsibly use any new credit you get.
Lenders use your score to determine whether they will approve your loan and the interest rate you will pay. Car insurance companies look at your score to decide whether to insure you and how much to charge for a policy. Cell phone companies use it to approve applications for new accounts. Landlords use this when deciding whether to rent an apartment to you.
For these reasons, if you have a low credit score you need to know about it before others do. And you should know how to take steps to improve it.
one more, VantageScoreIt was produced by the major credit reporting agencies, Experian, Equifax and TransUnion, and also ranges from 300 to 850. Other similar credit scores are close, but the FICO score is used in more than 90 percent of U.S. lenders’ purchasing lending decisions. Over 27 million FICO scores every day.
While no single credit score is universally used by all financial institutions, extensive data shows that people with FICO scores below 670 to 700 are significantly more likely to make late payments.
Having a high FICO score can help you save money when you get a new loan because lenders give their best rates to borrowers with high scores.
Here’s an example from FICO: Compare two people, one with a credit score of 620 and the other with a score of 760. Each is borrowing $280,000 for a 30-year fixed-rate mortgage. A borrower with a 620 score would qualify for a mortgage with an interest rate of about 5.08 percent, but someone with a score of 720 would get a rate of about 3.49 percent.
In this scenario, a borrower with a 720 FICO score would pay $261 less per month and save $93,960 over the life of the loan.
Don’t know your score? You can get it for free on sites like Credit karmaand you can get your credit report for free once a year from each of the three major credit bureaus. annualcreditreport.com. The first step toward improving your score is to review your report because if it contains any false negative information, it can lower your credit score.
Don’t be surprised to see different information on your report from each of the three credit bureaus. If you want a complete picture of all your credit information, you should get your reports from all three bureaus.
If you find any incorrect information that you think should be removed, file a dispute with the credit bureau. He then has the burden of asking the creditor to either remove it or prove that it is correct.
In a follow-up article, I’ll write about the main factors that make up your credit score and what you can do to improve it.