What does a credit score affect?
| Posted in Bank Blogs
Your credit score is one of the most important factors lenders consider when you apply for a loan. It's a key factor in determining whether or not you'll be approved for a loan, and it can also affect the interest rate you're offered. A higher credit score means you're seen as a lower risk to lenders, and you may be offered a lower interest rate as a result.
Your credit score is a three-digit number--usually between 300 and 850--that reflects your creditworthiness. It is used by lenders to determine how much interest to charge you on a loan and can affect your ability to get a job, rent an apartment, or purchase a car or home. You are entitled to a free copy of your credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). You can request a copy from AnnualCreditReport.com.
There are a few things that can affect your credit score, including your payment history, the types of credit accounts you have, and your credit utilization ratio.
Your credit utilization ratio--a key credit scoring model--is another important factor in your credit score. This is the percentage of your available credit that you're using at any given time. For example, if you have a credit limit of $1,000 and you're carrying a balance of $500, your credit utilization ratio is 50%.
A high credit utilization ratio can be a sign of financial distress, and it can hurt your score. So it's important to keep your balances low and make sure you're not using more than 30% of your available credit. When lenders perform a credit check, this factor is key in determining whether or not you have a responsible credit history.
Your payment history is also one of the most important factors in your credit score. It's a record of how you've handled your financial obligations in the past, and it tells lenders whether or not you're likely to pay back a loan in the future.
The types of credit accounts you have can also affect your credit score. Having a mix of different types of credit accounts, such as a mortgage, a car loan, and a credit card can actually help your score. This is because it shows that you can manage different types of debt responsibly. A credit card account that shows consistent, full monthly payments can have a very positive impact on your score when a copy of your credit is requested by a lender.
If you're just getting started with credit cards, you may want to consider applying for a secured credit card. A secured credit card is a type of credit card that requires a security deposit in order to open an account. The deposit is held by the credit card issuer and used as collateral for the account.
This type of credit card can be a good option for people who are working on establishing or rebuilding their credit history. Building credit through responsible use of a secured credit card can make the authorized user a better candidate for other types of credit, such as mortgages, car loans, and unsecured credit cards.
When you open a secured credit card account, you will need to provide the credit card issuer with a security deposit. The amount of the deposit will be equal to your credit limit. For example, if you deposit $500, your credit limit will also be $500. The deposit is held in a savings account by the credit card issuer, and it is used as collateral for the account.
In most cases, secured credit cards work just like regular credit cards. You will receive a monthly statement showing your balance and your payment due date. You can choose to pay your balance in full each month, or you can make a minimum payment. If you make a minimum payment, you will be charged interest on the outstanding balance.
Your employment history can have a big impact on your credit score. If you've had a long history of stable employment, that can be a positive factor in your credit score. On the other hand, if you've had frequent job changes or periods of unemployment, that can be a negative factor.
The reason why employment history is important to your credit score is because it's one factor that lenders look at when considering you for a loan. They want to see that you have a steady source of income and are likely to continue to have one in the future. If you have a history of job changes or unemployment, that can make lenders nervous about giving you a loan.
Your insurance coverage can have an impact on your credit score, and vice versa. If you have a good credit score, you may be able to get lower rates on your insurance premiums. This is because insurers often view people with good credit as being less of a risk.
On the other hand, if you have a poor credit score, you may be required to pay higher rates for your insurance. This is because people with poor credit are often seen as being more of a risk.
Personal loans and mortgage loans require insurance coverage. Your home insurance plan for dwelling coverage and other covered losses can be affected by your credit score, as rates vary according to the type of coverage and your payment history.
Everything from auto insurance to loan origination fees to life insurance to student loans can positively affect your score, or feature insurance premiums that are negatively affected by a low existing score.
There are a few ways you can help keep your insurance rates down, even if you have a poor credit score. One example is to research competing insurance companies to find the best rates. This will help you understand whether or not you're not paying for more coverage than you need. If you have a good credit score, you may also want to consider using it to negotiate a lower rate with your insurance company.
There are a few things you can do to improve your credit score. First, make sure to pay bills on time, every billing cycle. Another is to keep your balances low and try to use a mix of different types of credit accounts. And finally, you can check your credit report regularly to make sure there are no errors that could be dragging down your score.
If you're not happy with your credit score, there are steps you can take to improve it. With a little effort, you can get your score up and make yourself a more attractive borrower to lenders. Contact a Premier Community Bank Loan Officer today to get started on your financial future or visit www.premiercommunity.com/loans.