Your
Credit Score
A credit score
is one of several pieces of information a lender uses to decide whether or
not you qualify for a loan. If you’ve ever had a car loan or a credit
card, you’ve had a credit score, even if you didn’t know it. Your credit
score helps answer the big question in a lender’s mind: If I give this
person a loan will I get paid back consistently and on time?
Do you have any
control over your credit score? You bet you do. Your credit score is a
numerical snapshot of your current credit risk picture. When a potential
lender looks at your credit score, several things become clear:
-
How you pay
your bills.
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How much
outstanding debt you have.
-
How long you’ve
had credit.
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The types of
credit you’ve had. And how many times you’ve applied for or opened
new lines of credit recently.
That means, like
Santa Claus, your lender can see whether you’ve been naughty or nice to
your creditors. If you’ve got
a good track record of paying your bills on time and using credit
conservatively, your credit score will reflect this.
If you’ve had delinquencies and late payments, your credit score
won’t look so good.
-
But no credit
score is forever. You can always take these steps to improve it: Check
your credit report every year.
-
Correct any
mistakes you find in your credit report. Don’t rely on a so-called “credit-fixer.”
Do it yourself. always pay your bills on time.
-
Keep your
balances low. Do not apply for, and open, multiple credit accounts in a
short period of time.
-
Use credit
conservatively. If you handle your credit wisely, over time your credit
risk picture will improve and so will your credit score.
By the way, don’t
get too attached to the actual number your lender uses for your credit
score. Scoring systems use different numeric scales. So it’s hard to say
what a good credit score number is. Let’s just say that a good credit
score is one that helps you get your loan.
One
more thing to remember about credit scores. While lenders can look at the
way you handle your credit, they do not look at your race, your gender, your
religion, where you were born or where you live. With credit scores,
everyone gets a fair shake at getting a loan or a new line of credit.
