Posted On: October 23, 2023 by Prevail Bank in: Banking Business Digital Banking Home Loans
Are you in the market for a car, apartment, or your very first home? If you answered yes to any of these, then you should focus on understanding credit scores and why they are essential.
What is a Credit Score?
A credit score is a 3-digit number (between 300 to 850) that your lender will use to determine your creditworthiness. Think of your credit score like a report card – it shows whether you've been meeting your debt payments on time. The lender uses your credit score to evaluate your ability to repay the loan over time if you were to be approved.
Why is a Credit Score important?
Your credit score is a key factor in making those big purchases in life, such as buying a house, obtaining a credit card, securing an auto loan, applying for an apartment, and more. Before you are approved for any of these, you’ll have to undergo a credit check. If your credit score is low, you may face higher interest rates or the possibility of not being approved.
What is Considered a Good Credit Score?
A good credit score would typically be above 700. While some lenders may approve your application with a lower credit score, it usually requires a higher down payment and/or higher interest rate. The golden rule to a good credit score is ensuring your debt payments are always on time. Late or missed payments can result in a lower credit score.
How to monitor your Credit Score
It is recommended to check on your credit periodically. By using www.annualcreditreport.com, you can check your credit reports for free from all three credit bureaus annually. This service was put into place so that consumers could check their accounts for fraudulent activity without a fee. A suggestion is to check one of the three bureaus every four months, to space out your free, annual checks.
Tip: If you find a record of any accounts you did not open or any incorrect information on these reports, be sure to contact that credit bureau immediately.
Don't wait until it's too late – start learning now.
Managing your credit score is a long-term commitment. It's crucial to understand the fundamentals and significance of maintaining a healthy credit score, especially for those new to the concept. We offer a free tool called "Credit Sense" that’s available on Apple and Android Apps. Credit Sense allows you to check your credit score at any time and provides various free resources to help you improve it. Visit our blog to learn more about Credit Sense and how it can benefit you.
