PERSONAL FINANCE 101
Understanding Credit Scores
By taking an annual look at your credit report, you can:
1) Know your financial health: Your credit report impacts your loan rates, mortgage rates and credit card approvals. It can even impact apartment applications, cell phone plans or job applications. It’s important to monitor your score so you can improve or maintain it and see your progress over time.
2) Double check that the information is accurate: Your credit report will have important personal information including your name, address, Social Security number and date of birth.
3) Verify lender payment history: Verify loan information to ensure your lenders are reporting correctly.
- Inquiries: Your credit report also will show your soft and hard inquiries. Soft pulls don’t impact your credit scores but hard pulls do.
- Bankruptcies and collection accounts: If you have any bankruptcies or accounts in collections this will be on your report. As with the other sections, check these are correct.
- If anything is truly inaccurate or missing, you can dispute your credit report online or by mail.
4) Avoid surprises when you apply for a loan or credit card: By looking at your credit report and score, you can have realistic expectations when you apply for a new loan, mortgage, credit card or refinance. FICO credit scores range from 300 to 850 and fall into five different levels: poor, fair, good, very good and excellent/exceptional.
With a better credit score, you may be approved for more types of loans, higher loan amounts and lower interest rates. People with high credit scores are considered a lower risk to most creditors.
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