Your credit score is an indicator of your financial power. When you first start having any financial activity such as opening a bank account, applying for a credit card, a loan, and so on, that is when you start to build your credit score. What does it represent? It represents your credit worth and an indicator of how responsible you are financially.
According to Experian, credit score ranges are as follows:
- Excellent: 781 to 850
- Good: 661 to 780
- Fair: 601 to 660
- Poor: 500 to 600
- Very Poor: 300 to 499
Having a high credit score should be the goal. The higher the credit score, the easier it will be for you to obtain credit such as a loan.
When Do Credit Scores Count?
When you credit score will be inquired. If you are purchasing a car and financing it with a loan, buying a home, renting an apartment, applying for a credit card, or even buying a smartphone at a phone dealer, they will check your credit. They will want to know if you are credit worthy to engage in a financial transaction.
What Are The Benefits Of Having A High Score?
The best benefit you’ll immediately see is that most financial applications such as a loan or a credit card will be approved. This is a great benefit to have. Another benefit I experienced is that you can potentially get a lower interest rate on a loan. If you have an OK score, a lender will have more concerns about you repaying the money than someone who has an excellent credit score, and therefore will charge you extra.
How Do You Raise Your Score?
If your credit score needs improving, according to Experian, there are a few ways to increase your credit score:
- Pay Your Bill On Time
- Get Credit for Making Utility and Cell Phone Payments on Time
- Pay off Debt and Keep Balances Low on Credit Cards and Other Revolving Credit
- Apply for and Open New Credit Accounts Only as Needed
- Don’t Close Unused Credit Cards
- Don’t Apply for Too Much New Credit, Resulting in Multiple Inquiries
- Dispute Any Inaccuracies on Your Credit Reports
Building your score takes time. It’s like building a relationship trust which is kind of what you are doing when you are essentially borrowing money. Can the lenders trust you? Your credit score is that trust indicator.
To check your credit score, get your free annual credit report. You are allowed one free annual report from this site. Take the time to look through the report. Identify any accounts you do not recognize and dispute any inaccuracies.
Financial trust is not just with a lender. Your financial trust will follow you to your personal life. An interesting story I have is that when I first met my wife, one of the questions she asked me when we were getting to know each other was, “What’s your credit score?” It was the first time anyone has asked me that and 15 some years later, I cannot tell you how important that question was. Financial trust has to be solid in your personal relationships as well.
The point of this article is that financial knowledge and execution if very important. Being financially responsible resulting in a high credit score is key to financial independence. You understand your financial power and avoid the things that will impact your score. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.
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