What is Credit Score And Why Is It Important?

Do you know about credit score? In a survey conducted by American Bankers’ Association surveys, it was found that less than 42% that is less than half of the total U.S citizens know about their credit score. Knowing a credit score is very important because this will impact how the lenders will lend you the money in the near future. So the main question now is:

What is a Credit score?

Everyone living in the US has a credit history. This is linked to their social security number. This history shows the time when you have taken out a loan or used your credit to make late payments, whether you have defaulted your loan more than once or not. After analysing the above things if it found that you have a bad credit score or in fact no score at all then you may not give a loan by the lender.

A credit score is used by different people for different purposes. Many organisations will look up to your credit score as a standard to measure your credibility. Lenders will look at it to determine how much loan they should give and at what interest rate should the loan be provided at. Insurance agents will link your credit score with the number of claims that they expect you to file. Landlords will look at your score to determine whether they should rent you or not. And also to determine the security deposit amount that you need to pay them beforehand. Even employers will look into your credit score before hiring you.

For all the reasons mentioned above, it is important that you have a valid credit score. If you are applying for loans and other stuff than a credit score of 720 and above is considered a good score while a score of 750 and above is considered as an excellent credit score. This can also vary from the lenders and how they evaluate the consumer’s credit score. There are also multiple sites where you can get your credit score for free.

So how you establish your credit history?

There are many simple ways to get started on establishing your credit history. You can start by getting a secured credit card. For example, if you deposit $200, then you will be charged $200 on the card. For choosing a secured credit card make sure your score is reported to three major credit bureaus. This will make you establish credit with them. Also research about the fees associated with your card and amount that needs to be deposited.

Certain factors might affect your credit score like your bill-paying history, available credit, the period you had them, number of credit amounts, any debts that can be referred to as foreclosures, collection.