Is Your Credit Score Hurting You?
You know you have a credit score, and you think it’s decent, but why is it important?
A good credit score makes you less of a risk in a lender’s eye. Therefore, a good credit score will help you borrow money at a lower interest rate, whether for a credit card, car loan or home mortgage.
Credit scores generally compare 5 factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit (10%).
Each lender’s definition of good credit varies, but below is a general idea of how credit scores are viewed.
- Excellent Credit: 781 – 850
- Good Credit: 661-780
- Fair Credit: 601-660
- Poor Credit: 501-600
- Bad Credit: below 500
Don’t worry if your score isn’t 850, only about 10% of applicants have a score over 800. Scores in the 700’s or above are excellent and will help you get a loan with the lowest interest rate. When your credit score dips in to the 600’s, you are more likely run into issues with lenders, who may refuse to offer you credit.
There are three credit bureaus that calculate your credit score: Equifax, Experian, and TransUnion. Often, all three scores are slightly different.
It is important that you keep track of your credit score and check it at least yearly. This will insure that there are no surprises when you go to take out a loan. It is quite easy these days to check your credit score. Below are two free options. Remember, consumer initiated credit inquiries do not count against your credit score.
Credit Karma will give you free credit scores simultaneously from TransUnion and Equifax.
Mint will allow you to get your credit score for free as well, from Experian.