Understanding your credit score at an early age is one of the most important steps you can take toward financial health. Your credit score shows lenders how responsible you are when using credit. The higher your score, the easier you may find it being approved for new loans and lines of credit. A higher credit score can also help with getting low interest rates when you borrow.
More than 90% of top lenders use FICO credit scores to determine your borrowing eligibility. Five important factors make up your score:
Individuals with a credit score in this range show that they’re very responsible in managing their borrowing. These individuals usually have no issue qualifying for loans with the lowest interest rates. People with a score like this generally don’t have problems with late payments and have long credit histories along with very low balances on credit cards. Having an exceptional credit score is useful when qualifying for any type of loan such as car loans and mortgages.
A credit score in this range shows an individual is responsible when it comes to credit and money management. A majority of their payments, such as credit card and rental payments are made on time. Individuals with a credit score in this range usually maintain low credit balances compared to their credit limit.
Having a score between this range means you are slightly above average, when ranking credit scores the average FICO score is 704. You may still receive good interest rates but it may be difficult to qualify for some credit.
Individuals in this range may have some areas needing improvement on their credit history but nothing major. Most lenders will likely extend lines of credit to these individuals but options will be more limited and rates will often be higher.
Individuals with a range under 580 most likely have damaged credit history. This may be because they did’t pay back personal loans, missed multiple payments, or have high credit utilization. Unfortunately, individuals that fall in this range will have a difficult time getting new lines of credit.
To prevent any surprises, its always good to keep tabs on your credit history by pulling a copy of your credit report. There are three Major credit bureaus that can do this for you: Equifax, Transunion, and Experian. you can pull one from each once a year for free. By doing this, you’re able to see what’s helping your credit and what’s hurting your credit. Maintaining a good credit score can be extremely beneficial in the world of investing. This is especially true for getting the best deals in real estate. Understanding your credit score can go a long way for you on your journey towards financial freedom.
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