Credit scores are something we do not generally learn about the significant impact until sitting in a room making a large purchase such as a vehicle or applying for a mortgage and learning about the advantages you may receive with a high credit score or adversely, the high interest rate or complete denial of a loan based on a low credit score.
What Is A Credit Score?
A credit score is a number that ranges anywhere from 300-850 that is used by all sorts of companies; auto companies, banks, mortgage lenders, government agencies, landlords, and the like to determine if you are a good candidate for a loan. There are 5 ranges that your credit score will fall into; Bad 300-549, Poor 550-640, Fair 650-699, Good 700-749 and Excellent 750-850. The goal is to be in the top two sections in order to receive the benefits available for high scores.
This number is ultimately determined to be the single largest indicator as to the probability that you will actually pay back the money you loan from them. The lower your credit score the higher probability that you may default on the loan versus a high credit score which shows that you have exhibited a consistent responsible history of paying your bills and loans on time.
For most of us, loans from a bank are a regular part of life. We apply for car loans, home loans, credit cards and even direct lines of credit. Having a high credit score means companies are going to be more willing to give you lower interest rates which leaves you with more money to spend on other items you may want or need.
How Is Your Credit Score Calculated?
Your credit score is comprised of 5 categories that all contribute in different ways to determining your credit score.
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