You must have noticed the three-digit number on your credit report.
This is known as your credit score and says a lot about how well you are handling the financial situation in your life.
However, not many readers are completely aware of what is it and how important it is. That’s what we will talk about here!
Here’s What You Need to Know About What Is Credit Score
There are 5 things that you must know about credit score. These will help you make better financial decisions and improve the look of your credit report as well.
1. It Has Devised Ranges
In order to make it easier for financial institutes to figure out where you stand, credit scores have been divided into 5 categories. These include:
- Poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
Your score can fluctuate over range of time depending on your spending habits, credit card use, debts, and other behavior.
2. It Helps Lenders Decide Your Fate
The benefit of dividing score into categories is that it helps card issuers and lenders decide if they should do business with your or not. Furthermore, card terms are also determined on the basis of your score.
Users who have an excellent score can qualify for loans and cards with lower interest rates, reward offers, and sometimes they can also successfully avoid annual fees.
On the other hand, people with poor numbers can only qualify for limited number of credit cards.
They also need to pay high interest charges and sometimes their only option is to apply for a secured card with an initial security deposit.
3. You Are In Control of What Is Credit Score On Your Report
By now you would have understood the importance of credit score in deciding your financial benefits.
If you are worried about your bad score, we are here to remind you that the situation can change with only a little effort.
You have complete control over it. With timely payments and low utilization ratio, you can quickly fix your broken score within couple of months.
If you are working towards a better score, simply keep in mind that you should not carry any debt or spend more than your credit line allows.
4. It Does Not Change Overnight
Although there are many tips and advices on how you can improve your credit score, there is no way to fix it over night. Improving the score requires you to be on your good behavior for months.
The only shortcut is disputing wrong information on your credit report that is pulling down your credit score.
However, in this case, you have to ensure that the data you are disputing is actually wrong and that fixing it would have visible effect on your credit score.
This may include a debt that you have already cleared or a hard inquiry that did not take place.
5. You Can Check Your Credit Scores For FREE
Major credit bureaus assemble credit report and assess credit score on yearly basis. You can also obtain a free report from them once in a year.
However, that is not the only way to keep a check on your score. There a number of online platform that will let you check FICO score for free.
Hopefully, now you understand everything you need to know about what is credit score and how you can improve it quickly. Best of Luck!
Miriam Caldwell is a dedicated & expert freelance writer to educate people about personal finance management and budgeting. She shared her knowledge and published the articles at TheBalance.com, GOBankingRates, and BlissfullyDomestic.com. Many financial institutes pick Caldwell as the brilliant source for educational personal finance content.