Why Your Credit Score Matters
October 19 2017
In addition to influencing your eligibility for a new credit card or car loan, your credit score also affects your ability to get a mortgage and the interest rate you might get when looking to buy a home. But what exactly does this important number convey and how can you improve yours? Read on for the answers to these questions and more.
Q: What is a credit score?
A: Simply put, it's a three-digit number that represents your creditworthiness. Most lenders use the FICO score, which ranges from 300 to 850.
Q: How is a credit score different from a credit report?
A: The biggest difference is that the latter offers more insight. While a score is a number based on your credit history, the full details can be found in your report.
Q: Why is having a good score important when buying a home?
A: It influences what kind of interest rate and conditions you'll receive. When looking for a home, the higher your number, the more likely lenders are to give you a good rate. Typically, anything in the mid-700s or higher is considered excellent.
Q: What impacts a score?
A: There are five factors that make up your FICO number: payment history, amounts owed, length of credit history, credit mix and new credit.
Q: How can I improve my score?
A: If your number is far from perfect, the good news is that it's not set in stone, and with a bit of work, you can eventually change it. As your payment history makes up 35 percent of your score, paying your bills on time is one of the best ways to improve your number. Other options include consolidating debt and reviewing your credit report for any errors.