Your credit score is an important measure of your current financial situation. A credit score is a number ranging from 300 to 950. This number is a measure of your trustworthiness as a borrower. All lenders ranging from banks to credit card companies to car dealerships will review your credit score before giving you credit. By translating and understanding your credit score, you can predict the terms of your loans and discover whether you need to work on improving your credit.
Order your credit score from one of the three credit rating agencies. The three agencies are: Equifax, Transunion and Experion.
Find the number representing your credit score. This should be clearly labelled on your report.
Relax if your score is 720 or higher. You have excellent credit and have good credit habits. You should receive the lowest available interest rate for your credit cards, home loans and car loans.
Keep working hard if your score is between 675 and 719. You are not in the highest credit category but still should not have trouble finding loans. Your loan interest rates will be about 0.5% higher than someone with excellent credit. Continue paying your bills on time and you should soon move into the best credit category.
Review your credit habits if your score is between 620 and 674. You have a below-average credit score. You will likely be charged an extra 2% in annual interest on your loans versus someone with excellent credit.
Take major steps in improving your credit habits if your score is below 620. You are in the lowest possible credit category. Many lenders will deny you loans. If you get a loan, your loan interest rate will be about 3% higher than someone with excellent credit.
- Always make sure to make your minimum monthly credit payments. Consistently paying your bills is the best way to improve your score.
David Rodeck has been writing professionally since 2011. He specializes in insurance, investment management and retirement planning for various websites. He graduated with a Bachelor of Science in economics from McGill University.