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Finding your credit score is a breeze! You don't have to go on a big search—just take a look at your credit card or loan statement. Lots of credit card companies and lenders show your score right there. You can also sign up for a credit monitoring service to check your score anytime you want.
Regrettably, only about 20% of Americans have an excellent credit score. This means that most people struggle with financial obligations, impacting their credit scores and ability to borrow money. Since borrowing is crucial in today's world, attracting lenders with good rates becomes crucial for achieving financial freedom.
What Is a Credit Score?
Your credit score is a number that helps lenders assess your ability to pay back money that you want to borrow. Most adult consumers have a credit score. Though it's a relatively simple concept to grasp, maintaining good credit can be difficult to achieve. The score is generated by three major credit bureaus: Equifax®, Experian® and Transunion®. If you don't recognize these names, you can be certain that your bank does. All major lending institutions look to these credit reporting agencies to help them to deal with risk.
There are different levels of credit, based on a numerical score of between 300 and 850. Based on your score, you might have poor credit or excellent credit. Generally, here's how the scores are categorized:
- 300-579 = poor
- 580-669 = fair
- 670-739 = good
- 740-799 = very good
- 800-850 = excellent
Consider purchasing a new vehicle. This is among the most common scenarios when consumers are confronted by their credit scores, with the most well-known credit score calculation referred to as FICO®. Because most people don't pay cash for their new vehicles, they are forced to borrow. At this point, the dealership reaches out to the credit bureaus to examine your personal score.
The deal that you are offered by the dealership is directly associated with your FICO score. If you carry a very good or excellent score, both the dealership and the lender will want to work with you, and they will show you by way of offering low rates of interest to you. This is because you've proven yourself to be a good risk. When banks come across good risks, they're eager to lend because it means that they'll likely get the payments and the interest without having to chase after it.
If, however, you approach the same dealership with a poor credit score, the experience will be much different. Possibly, the lender will not work with you. If they do, they will offer you high-interest rates. This is because you represent a bad risk to them. If you default on the loan, it impacts them.
Consider, too, the effects of diligence concerning those monthly car payments. If you pay on time, every time, your credit continues to improve because you've shown a static ability to borrow money and repay that money without incident. If you miss payments, you'll get hit with penalties. If you default on the loan, you'll not only lose the vehicle, but you'll also push your credit score further down.
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How Do You Get Free Credit Reports?
You can request a free credit report from AnnualCreditReport.com once every 12-months. This is generally considered to be the best, and easiest, way to check on your credit. You do not get penalized for checking your credit. Logging on to this website will allow you access to the reporting that's been done on you by the three credit bureaus, and it won't cost you a thing.
Credit Monitoring Subscription Services
If you want to have access to your credit score and activity that impacts your credit report on demand, you can subscribe to a credit monitoring service. There are quite a few to choose from with prices ranging on average from $10 to $25 a month. These services can be set up to send you an alert should a new account appear on your report or if suspicious activity is occurring. If you can afford it and if having immediate access is important to you, then a subscription service should be something you consider.
How Do You Repair Your Credit Score?
There are lots of ways that a person can repair damaged credit. The first step is to recognize that you must be diligent with your financial obligations. There are a number of ways to borrow money and each brings the potential to quickly wind up in debt if left unchecked.
Checking your credit report for errors is smart and it means that you've been keeping your own records at home. Anytime you're able to cross-reference an item, you'll achieve more clarity. Another way to improve your score is to keep paying down any credit card debt that you have. Sometimes, if borrowers find themselves pinched and seemingly out of options, they will make contact with the credit card company to try to work out a mutually beneficial deal. After all, they want to help you to make your payments, so they might help you to restructure the terms of your situation.
While you are waiting the years that it takes for negative items to fall off your credit report, you can apply for new credit cards. However, these are not to be used willy-nilly for fun and excitement. Rather, they can be used sparingly to show that you've established a new more responsible behavior for purchasing items and paying your bills on time.
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How Can You Protect Yourself from Identity Theft?
Identity theft isn't going away, but there are things you can do to minimize your risk. To begin, keep your social security number as private as you can. By not sharing any personal information, such as your address, maiden name, or bank routing number, you make it harder for thieves to target you.
Showing Respect for Your Credit Score Will Yield Dividends
When most people start college, they get a credit card. In fact, lots of colleges will host lenders so as to match students with credit options. If those students don't receive some kind of financial literacy to go with their new credit card, they risk running up the balance. To have a credit card is to know how easy it is to quickly end up underwater, financially speaking.
Showing respect for your credit, however, does pay off. Establishing and maintaining good credit is essential to living a life of financial opportunity. When lending institutions come across a candidate with good credit, they respond by offering things, like a generous interest rate. When they are dealing with a candidate with poor credit, the opposite is true. Just like pursuing higher education ensures that you obtain the knowledge that you need to work in the professional world that you desire, consistently nurturing and checking your credit score ensures that you have a degree of financial freedom.