Why Is Your Credit Score Important?
Posted by Aprilangel in CreditWith the world in financial chaos, possibly for the next couple years, your credit score is important just to sustain your life and obligations as they stand right now. If you had reasonable credit, now is not the time to make it worse.
Your credit score is important and it should mean a lot to you. This number could indicate the difference between whether you can get a job, rent an apartment, buy a car or buy a house. If your credit score is poor, it can also mean you’ll pay higher interest. It’s basically a number that says how effectively you deal with your finances and your life.
First you should know how your FICO score is computed. Your FICO credit score is comprised of 5 different areas. Your payment history accounts for 35%, amounts currently owed on all your bills accounts for 30%, and the rest is divided up by length of credit history, new credit and types of credit used.
On the other hand, some things are not included in your credit score. Things such as your race, your salary, where you live and your age are not calculated in your credit score. So don’t feel singled out about these issues as none of them are taken into consideration.
Credit bureaus use a range of 300 to 850 to classify your credit score. So the obvious applies. A credit score of 300 means it is literally impossible for you to obtain credit especially now when credit is tight. If you have a score of 700 to 850 you’re considered a good risk so when you obtain credit it will come with a lower interest rate. The average American is thought to be somewhere in the middle.
How can you change your poor credit score? First you should get rid of your credit cards. Call the customer service number on the back of the card and tell the agent you want this card “closed by consumer.” Also request that they send you a letter documenting your conversation. Each time you do this your credit score will improve. Too many credit cards equal a poor credit score. Always make your payments on time. As we progress through this county’s financial crisis, making a late payment on anything could increase your interest rate to 29.9%. That means your payments will sky rocket. The rules have stiffened so you must take paying your bills on time seriously.
If you find your identity has been stolen, report it to all 3 credit bureaus without delay as this will definitely affect your credit score. Ask them to flag your account so you won’t be responsible for some thief who is recklessly spending all your money. Also, report it to the police immediately and get a police report.
Your credit score, good or bad will have an effect on your life. It’s important that you know what your credit score means. So take it upon yourself to find out exactly what your score is and move forward from there.
Resources: Hi, my name is April. I’ve written this article, why is my credit score so important as a way of informing people on how credit scores are formed and how you can make improvements. Please visit my website at www.savemoneysavetimenow.com
