Your credit score impacts so many aspects of your life from applying for loans and credit cards to being a part of the pre-employment process. This three number rating determines if the answer to requests you make will be a positive or negative response…that’s powerful. With that in mind, arm yourself with the knowledge of what it is, how it works and how to make it work in your favor.
Why Your Credit Score is so Important
Your credit score comprises of an evaluation of your credit history to determine you creditworthiness to lenders. This information is used by VantageScore 3.0 to determine your three digits rating. This rating then becomes your credit score. It ranges from 300 to 850, the higher the score the better chance of receiving a positive response and with some lenders, better interest rates. According to Experian’s 2017 State of Credit Study, the average score across the United States was 675, which is considered a prime rating. A rating of 660 and less is rated near prime, subprime and deep subprime while a score of 781 and higher is rated super prime.
How to Improve Your Credit Rating
Certain steps can be taken to increase your credit rating and receive more desirable interest rates from lenders. This means you end up paying less in interest and saving more money.
First, paying your bills on time is the best thing you can do. It is best to avoid letting bills become past due and being sent to a collection agency.
Next is credit utilization “which simply means minimize the balance owed on your credit cards” as another way to manage your score. The ideal utilization percentage is 30% of the line of credit so working to keep credit card balances low works in favor of your credit score.
Finally, monitor your credit score. Use Annual Credit Report to monitor your full credit report then use free monitoring services like Credit Karma and Credit Sesame to keep up with any changes.
Your rating can have such a major impact on your personal financial decisions. Ensure it provides the best reflection of you.