Think back to the first time you heard about your credit score. It was probably when you looked into auto loans, mortgages, or other personal loans. A credit score in its simplest terms looks at your creditworthiness as a potential loan applicant.
According to the most recent VantageScore report, America’s average credit score is 697. And in case you’re wondering what your credit score is, you can find out through ordering a free credit report for the year from any one of the 3 credit reporting companies in the US.
A certified credit counselor can also walk you through the details, but here are the basics you need to understand about your credit score.
What Exactly Is A Credit Score?
The concept of credit scores goes back to the 1950s when they were first developed by Fair Isaac Corp., i.e., FICO, another company like VantageScore that calculates consumers’ credit scores.
According to their principles, 300 is the lowest credit score, while 800 is the highest. The score calculated using credit payment history, debt load, new credit, and other elements helps financial institutions get a clear picture of their customer’s financial situation and the likelihood of them paying back loans.
There can be more than one credit score depending on the type of lender they’re generated for, and each may use only certain aspects of a consumer’s financial history. Moreover, your credit score is constantly evolving depending on the payments, etc.
Why Is It So Important?
Credit scores are important because they work as financial tools, meaning that they do a lot more than just get you suitable loans and interest rates. And the higher your credit score, the better it works as a financial tool.
For example, you can get the house of your dreams more easily with a higher credit score. Lenders will be more than willing to give mortgage loans if you’ve got a good credit score. Moreover, your interest rate will be determined by your credit score.
Besides houses, your auto loans, employment prospects, business loans, utility services, and other critical aspects of your life are all ruled by your credit score.
How Can You Improve Your Credit Score?
Having a low credit score isn’t the end of the road for you, though. There are several ways for you to improve your credit score. For starters, you need to review your credit reports to see what’s affecting your credit score the most and work on those aspects of the report first.
In many cases, it’s missed payments, collections, and judgments that contribute to your low credit score.
If you’re not sure who to approach, let us help you out.
At American Debt Enders, we can help you with debt resolution services and also help you rebuild your credit score.
Call us for more information.