A low or inaccurate credit rating can have costly consequences. Here’s how to keep track of your credit score, how to get the highest possible score, and how to keep it that way. A bad credit score is not a good idea for your financial future.
If you believe that your credit history determines only the interest rate you earn for home investments, car investments, and credit cards; You’re wrong, but you’re not the only one according to some reviews. In a recent survey, less than half of the 1,497 respondents knew that in many countries, a poor credit rating could lead to higher car and home insurance rates or be denied credit.
Renting an apartment. The consequences go even further: in many areas, employers can use credit reports to examine applicants, and having a low credit score could mean paying $ 4,000 more for a typical car loan or $ 200,000 more for loans in lifetime than someone with a high credit rating.
How to understand your rating
In general, scores range from a minimum of 300 points to a maximum of 850. (The national average FICO score is 704). In general, a rating above 800 will qualify you for the lowest interest rates, although even a rating close to 700 should qualify you for a favorable rate.
Experian, one of the 3 major credit bureaus, defines the limits as follows:
- More than 800: exceptional. Less than 1% of borrowers in this range may become serious offenders. These will be easily approved for the lowest rates.
- 740-799: Very good. 1% of debtors in this category will likely become seriously delinquent. Lenders may offer you the lowest rates, but this is not guaranteed.
- 670-739: Okay. 8% could become seriously dead. This layer includes the average credit rating for the United States. People in this range are considered to be an “acceptable” loan risk.
- 580-669: reasonable. It is estimated that 27% of people in this group can become seriously delinquent, making them potential candidates for subprime loans at higher rates.
- 579 and below: Weak. This group is considered to have a high loan risk: about 62% could be seriously dead. They will only be eligible for the highest interest rates if they can get credit.
Although being left behind with a single payment can affect your score, a major negative change in your luck or behavior is unlikely to bring you to the lower end.
Taking action can help increase your rating. Don’t expect it to happen overnight – depending on the reasons for a low score, it could take 12 to 24 months to see a difference.
Do not apply for more than one credit card at a time. This generates numerous inquiries about your credit history, which can lower your score. Consider new tools that can increase your credit score. Consumers with low credit or very poor scores can now use two new tools that could improve creditworthiness, taking into account additional information such as utility or mortgage payments and bank balances.