While many people think that a credit score is just a buzz these days, the credit score, however, holds a significant value for many reasons.
A credit score tells a lot about a person to the most important individuals and institutions like;
- Insurance companies
- Potential Employers
- Retailers and credit lenders
Hence, this simple score has the power to either make or break your credit reliability.
The power of a credit score
Many of us, if not all, must have had shared our credit scores with at least one of the above-mentioned parties. A credit score has the power to determine if you may or not get;
- Approved for mortgage
- A job offer
- Approved for a car loan
- Competitive rates of insurance
- A cell phone contract
- Line of credit, bank loan or a credit card
That’s right; a credit score tells interested people, how dependable you are in terms of finance. That is, a credit score is basically a true reflection of how properly you manage your finances and if you pay your bills in a timely manner or not. Therefore, these three digits from 300 to 900 may determine the options that you hold for the items, most valuable to your everyday life.
Good habits bring good credit score
The most important factor to make a good credit score is the repayment habits. Simply think where do you fall on the 1-9 scale when it comes to your debt repayments? The answer to this question will tell a lot about your current credit score.
It is important to review your credit score at least annually to know your financial standings. Moreover, do consider the power that your credit score has for the major events of life such as your child’s education, buying a car etc
Credit score comes with a number
No matter what kind of credit you have, the thing that matters is the number attached to that. This number, however, tells the people, who review your credit report, about your timely repayment structure. Mostly lenders rate an account by using number scale to know if you are paying to items as agreed to. This may include, repossession, collections, bad debt, payment made regularly via restructured plan of repayment and others.
How to calculate a credit score?
No matter what type of credit you have there is no exact formula to calculate it. There is no exact criteria that would determine accurately how much your score may increase or reduce, depending on your actions. However, with some general budgeting, money management, and debt repayment habits, you may help yourself to get a good credit score.
Following that, a credit score is important to build your trustworthiness and to open credit options for you in the future. A person with a bad credit score not only suffers from the current financial positioning but also closes the options for future as no lender would like to invest in doubtful circumstances. Therefore, follow the above-discussed steps to maintain a good credit score and to build more reliability amongst lenders.