Here’s Why Your Credit Score Matters
As you likely know, credit scores are an important part of your financial life. Anytime you apply for a credit card, an auto loan, a mortgage or any other method of borrowing money, your credit score is going to play a big role.
Your credit history can also affect the interest rates on your loans, as well as your insurance premium. Here are answers to some common questions about credit.
Why does my credit score matter?
While you might not think about your credit score on a daily basis, it can have a big impact when you need to borrow money. Lenders will use it to determine how much to offer you and at what interest rate when you apply for a mortgage, auto loan or personal loan. And while your score isn’t used for Insurance purposes, your credit history may be used when determining your rates.
What is a good credit score?
FICO credit scores, the most commonly used credit scores, range from 300 to 850. They are broken into the following categories:
- Exceptional: 800 to 850
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 580 and below
What impacts your credit score?
Your credit score is calculated using five different weighted categories:
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Paying your bills on time and keeping your debt levels low can increase your score, while missing payments or maxing out your credit limit can cause it to drop.
All of this information is found on your credit report. You have a report with each of the three main credit bureaus — Equifax, Experian and TransUnion.
How do I check my credit score?
You can create an account with each of the credit bureaus to keep track of your score, and your bank or credit card company may allow you to check your score as well. You can also check your credit report weekly for free to ensure the information being used to calculate your credit score is accurate. If you find mistakes on your report, you can dispute them with the credit bureau that provided the report.
Do you have questions about your insurance coverage and what can impact your costs? Reach out today to discuss your policy.
