Your credit score is essentially a credit reputation that’s based on your history as a borrower, and it can affect your financial future in a number ways that you might not be aware of.
Because your credit score reflects your borrowing and payment history, it gives lenders a basic idea of your credit-worthiness.
It’s not only important to make sure this number is as high as possible, but also to make sure it accurately reflects your credit portfolio.
When your credit score is high, it’s easier to get loans and competitive interest rates. People with poor credit usually end up paying higher interest rates, and sometimes they aren’t even able to get a loan. In addition to not being able to get a loan or credit card, having a low credit score can affect your ability to get a job or get cheap insurance.
When is Your Credit Score Pulled?
Finance professionals will typically pull your credit score whenever you apply for:
- personal loans or mortgages
- credit cards
- insurance policies
- certain jobs
Additionally, many landlords now consider the credit of prospective tenants to determine their likeliness to pay (or skip out on) rent. Some employers will check out your credit report, and if you work in the finance industry you can expect this to be a standard part of the application process. Having a good credit score can benefit you both personally and professionally.
Upon your request, each of the three national credit bureaus must provide you with a free copy of your credit report once each year, so take advantage of this. By requesting a copy of your credit report each year, you’ll be able to regularly monitor if anything negative is affecting your credit score. To actually see your score vs just a report, you will need to pay a small fee, or get a free score through a service like Credit Karma. Once you know what your credit score is, you should actively work to increase your score.
How to Have a Good Credit Score?
Raising your score is very straight-forward. Here are a few things you can do:
- Pay your bills on time.
- Pay the full balance on your credit cards whenever possible (managing personal debt).
- Always pay at least the minimum payment amount, as having excessive debt can lower your score.
- If you have any delinquent accounts or loans, pay these off first.
- Maintain a good mix of credit: revolving (e.g. credit cards) and installment (e.g. mortgage).
- Avoid applying for too much credit at once.
Having good credit can benefit you both professionally and personally. With consistency and reliability, you can easily raise your credit score and get your financial life on track.