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Facts You Need To Know About Your Credit Score

Your credit score is one of the most critical numbers in your life. It is a three-digit number that represents your creditworthiness. A high credit score means you’re a low-risk borrower, which could lead to lenders offering you the best interest rates on loans and credit cards. Conversely, a low credit score could lead to higher interest rates, and you won’t be approved for certain loans or credit cards. And while it may seem as simple as just checking your number, there are quite a few things you need to know about your credit score. And this post is here to tell you all about it!

How A Credit Score Works

Credit Score

As the introduction touched on, lenders use credit scores to determine whether or not a person is a good candidate for a loan, but it can also affect things like interest rates and insurance premiums. But what exactly is a credit score, and how is it calculated? A credit score is a number that represents an individual’s creditworthiness. It is based on information from a person’s credit report, including their payment history, outstanding debts, and credit utilization. The higher the score, the more likely the person will be able to repay their debts.

There are several different scoring models out there, but the most common one used by lenders is the FICO score. This ranges from 300-850, with 850 being the highest possible score. The exact formula used by FICO is a closely guarded secret, but it is believed that credit utilization accounts for 30% of a person’s score in their scoring model. Therefore, having a zero balance on your credit cards is the best possible scenario because it shows that you are handling your debt responsibly.

Facts To Know About Your Credit Score

Even with an understanding of your credit score, it is still a good idea to be as informed as possible. The following are some of the various facts to know about your credit score:

Credit Reports And Credit Scores Are Different Things

Credit Score

Your credit report is a record of your credit history. It includes information about your borrowing and repaying habits and any other relevant financial information. Your credit score, on the other hand, is a number that represents your creditworthiness. Lenders use your credit score to assess your riskiness as a borrower. However, they may also use your credit report to get more information about you before making a lending decision.

Generally speaking, you should check your credit report regularly to ensure it is accurate. You can get a free copy of your credit report from each of the three major credit bureaus once every 12 months. As for your credit score, you can order it from various websites or buy it from some major credit bureaus.

Checking Your Credit Doesn’t Hurt Your Score

Credit Score

You might think checking your credit score would hurt your score, but that’s not the case. Regularly checking your credit report is one of the best things you can do to keep track of your financial health and ensure there are no errors. So if you’re worried about potential negative impacts on your credit score, don’t be. Checking your credit score does not affect your score whatsoever. So go ahead and check it as often as you like!

People believe checking your credit score could hurt your score because many websites offering “free credit scores” are trying to get you to sign up for some sort of monitoring service. These services usually have a monthly fee and monitor things like your identity, bank accounts, and credit score.

Canceling Credit Cards Can Lower Your Credit Score

Credit Score

The credit card company will close your account when you cancel a credit card. This can result in a decrease in your available credit, one factor that makes up your credit score. In addition, if you have a balance on the canceled card, that balance will still show up on your credit report as owed debt. This can also cause your credit score to go down.

It’s important to keep these things in mind if you’re thinking about canceling a credit card. While it might seem like a good idea to get rid of an unused card, it could end up hurting your credit score in the long run.

Your Credit Score Can Help You Catch Fraud

Credit Score

Your credit score is more than just a number. It’s also a tool that can help you catch fraud. If you suspect that someone has stolen your identity, one of the first things you should do is check your credit score. A sudden drop in your score could indicate that someone has opened up new accounts in your name.

Monitoring your credit score regularly is an excellent way to catch fraud early. If you see any suspicious activity, you can take steps to correct it and prevent further damage to your credit.

Your Credit Score Can Affect Your Ability To Get A Job

Credit Score

Your credit score can affect your ability to get a job. Many employers now check credit scores as part of the hiring process. A low credit score can signal to an employer that you are irresponsible and might be a financial risk. Conversely, a high credit score can give you a leg up in the hiring process. Therefore, if you have a low credit score, it is a good idea to try to improve it before you start looking for a job.

You might even consider asking your employer to check your credit score before making a job offer. This would allow you to explain any issues with your credit and help show that you are committed to improving it.

You Might Not Have A Credit Score

Credit Score

As strange as it may sound, it is possible to have no credit score, which could make it challenging to get a loan. There are a few reasons why you might not have a credit score. Perhaps you’ve never taken out a loan or used a credit card. Maybe you’ve had bad luck with money and have filed for bankruptcy. Or maybe you just haven’t been using credit long enough to build up a score.

Whatever the reason, not having a credit score can be a hindrance when getting loans. Lenders like to see a history of on-time payments and responsible borrowing before they’ll give you money. So if you don’t have a score, you might have to work harder to prove that you’re worthy of borrowing.

Stay Informed With The Things You Should Know About Your Credit Score!

So there you have it: a quick intro to credit scores and their meaning. Credit scores are important, but success is still possible without one. You should be in good shape if you’re smart about borrowing. But the only way to know is to check your credit score. Now that you’ve read this article, you should better understand the importance of your credit score and how it can affect you. If you don’t already know your FICO score, check it out now.