Myth: credit score – It’s just a number. Having a “good” credit score is important when thinking about a healthy financial future. A credit score determines the risk you may bring to financial centers (banks, credit unions, etc.) or lenders. For instance, the higher your score, the easier it can be to recieve a loan, lower interest rates, and even greater amenities. The real question is how do you know if you have a good credit score, and how can you improve your credit score? Here is some valuable information about credit scores that hopefully answers all your questions.
What is a considered a “good” credit score?
A credit score can be as low as 300, and as high as 850. The higher the credit score number the greater the credit score. Below is a chart on how credit scores are viewed.
Where can I check my credit score?
Each year you are able to receive three free credit reports. Three nationwide credit reporting agencies are required to give you one free credit report every year, if requested. These three credit agencies are Equifax, Experian, and TransUnion. If you need to check your credit score more than three times a year, you can pay for a credit report from any of these three agencies. There are also credit score services, such as Credit Karma, who share certain parts of the credit report with you.
How can I improve my credit score?
Improving your credit score can be done by being responsible about your money and implementing a few easy steps. Here are three ways to improve your credit score.
- Pay On Time: Probably the most important way to improve or keep a constant credit score is to pay back loans and credit cards on time. By paying back your loans, this shows lenders that you are reliable and trustworthy with your money.
- Limit your Loans: Another way to keep a stable credit score is by not borrowing money. The more loans you need, the less reliable you become, and the higher interest rates you will receive. Try making a savings plan that allows you to reach a final goal, or only take out a small loan.
- Stay Below your Credit Limit: After signing up for a credit card, a credit limit is issued. It usually starts off small, and increases depending on how reliable you are with your payments. Remember that you don’t always need to reach your credit limit, more advised, you shouldn’t come close to reaching your credit limit. A good rule of thumb is to keep your debt-to-credit ratio at 30% or lower. This is a good strategy because it shows lenders although you have this much credit to use, you only need to use 30%, making you a more trustworthy candidate.
Whether you’re trying to increase your credit score to receive a loan, receive lower interest rates, or gain greater amenities, implementing these strategies to improve your credit score will benefit you in the long-run.
Need more information about credit scores? MyMazuma offers a variety of resources that go more in-depth about how valuable credit scores are for your financial future.