A strong credit score has come to be more important than ever due to these uncertain economic times. Restrictions for lenders have gotten a lot tighter since the mortgage meltdown. There's no way of getting colse to it anymore - if you have bad credit, you won't be eligible for a home loan.
So you're probably wondering, "why is my credit score so important? And how is it determined?"
Ensure a Strong credit Score
At its basic level, a credit score is the estimate that indicates to lenders and creditors how likely you are to pay back the debt you owe. The score is essentially based on your borrowing history. It will conclude if you are eligible for a loan to buy a home, car, or finance your college tuition.
How do you know if you have a good credit score?
Scores range from practically 300 to 900, with the mean credit score in America being at about 693 according to Experian. Generally, if you have in the middle of 660 and 719 you're in good shape. Pay extra attention if you begin to fall below 620, as it will be highly difficult to qualify for any loan with this bad of credit. 720 and above means you have exquisite credit!
What's in a credit Score?
While the exact method to calculating a credit score is still unknown by the normal public, we do know what your score is comprised of from a normal standpoint.
• Timeliness of payments = 35%
• Amount of debt in relation to the estimate of your total credit = 30%
• Length of credit history = 15%
• Type of credit in use (installment loans, revolving, agency store cards, etc.) = 10%
Bankruptcies, foreclosures, and other judgments are all blemishes that can negatively impact your score. The more of these problems you have, the more lenders are reluctant to offer you a low interest rate.
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