How Credit Score Impacts Your Credit Rating?
You have probably heard of credit scores and ratings but if you are like most people, you probably do not have a good feel for what a credit score rating really means to you. The problem with this is that what you don’t know can hurt you and negatively impact your financial status. The information is not a secret and you should take the time to find out what your credit score is, and as is possible in almost all situations, put forth the effort to improve your credit score rating. This is frequently also called a FICO score based on the company that developed the formula to create the scoring system.
First of all, you need to understand how your credit score actually impacts your credit rating. You see, when you have a high credit score, your credit rating is much higher as well. High scores are considered excellent, while lower credit scores can give you a credit rating that is poor.
The three digit number that is used to show your credit score rating is calculated using a special formula. The scores that you can get are between 300 and 850 when you are dealing with a FICO score. You will find that there are several different factors that the score is based on. First of all, 35% of the score depends on your payment history and 30% depends on the amount of money that you currently owe. Another 15% is dependent upon the length of your credit history, 10% on the new accounts you have applied for or opened recently, and 10% is based on the different accounts that you have.
If the calculated credit score for you is over 750, almost all companies would consider this to be an excellent score and a good credit risk. The range between 660 to about 710 would be considered average or acceptable, and scores under 600 are considered to be poor credit risks. If you are anywhere below 700, there are almost certainly things you should be doing to raise your credit score rating.
Read More: How To Raise My Credit Score
Your credit score determines your credit worthiness in the eyes of the potential lender. It affects the amount of interest you will be charged, the maximum term that the lender will offer, and even whether or not your application will be approved. It can also determine whether or not you need to leave a deposit, even for something like renting a home.
For fixing credit score fast, there are several things you can do. The very first thing is to start paying each and every one of your bills on time so that you create a history of on time payments. Keep the outstanding balance on your credit cards well below your credit limit, where the ideal amount is around 25% to 30% of your credit limit. Avoid applying for new accounts all the time since having a lot of open accounts is negative.
As you can see, your credit score rating is extremely important. Take the time to find out what your score is so you’ll know how it is impacting your life. If your score is less than satisfactory, then start working to improve it to insure a better financial future.