Your credit score is one of the first things a lender looks at when you apply for credit. Credit scores help lenders determine how financially responsible you are, as well as whether or not you are likely to default on a loan. Whether you apply for a credit card, mortgage or car loan, your credit score will determine whether you get approved, as well as at what interest rate and loan amount. The higher your credit score, the better.
Credit Scores
Credit scores are calculated using your employment status, payment history, debt amount, inquiries and any bankruptcies or foreclosures. They range from about 330 to 850 with anything over about 720 considered as being good.
Interest
A good or excellent credit score will nab you lower interest rates, as well as zero interest credit cards. A good credit score can potentially save you thousands of dollars in loan interest fees.
Loan Amounts
A positive credit history, employment status and credit score means that you can get approved for higher loan amounts or credit card limits. This is particularly significant when applying for a home loan.
Reducing Current Interest Rates
If you currently have a high interest rate, improving your credit score will improve your chances of renegotiating for a lower interest rate.
Having a Low Credit Score
Having a low credit score will likely disqualify you from getting a home or car loan. If you are approved, you will likely have high and costly interest rates.
How to Improve Your Credit Score
Paying your bills on time, having low debt and paying your credit card balance off each month will help you increase your credit score.
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