Understanding your credit score and regularly checking it is good practice as your credit score plays a key role in your financial opportunities.
Keeping tabs on your credit score better prepares you to handle your finances and make educated financial decisions. Learn the basics of a credit score and why it’s so important in order to set yourself up for financial success.
What is a credit score?
Credit score is a commonly used term in the financial industry and is expressed in the form of a number. This number helps lenders assess how well you’ve controlled your financial obligations and payed your bills on time. Another way to think of your credit score is your level of financial trustworthiness. No two people have the same credit history. Your unique credit score is determined by factors such as your payment history, number of open accounts, amounts owed, length of credit history, and types of credit. Credit scores typically fall between 300 to 850, and the higher the score the better. This number can fluctuate monthly based on your financial actions.
While each financial institution holds their own interpretation of a credit score and its meaning, the chart below shows the most common classifications of credit scores.
When is my credit score used?
Lenders assess credit scores as a predictor that an individual will repay loans on time. So, they use your credit score to determine whether to lend you money and how much they should charge you for borrowing money. Your credit score is used when qualifying for a loan, getting approved for a credit card, determining interest rates and credit limits, and establishing the initial deposit required for things as such smartphones, cable service or utilities, or your ability to rent an apartment. Your credit score could also affect your auto insurance rates or even your chances of getting a new job.
How do I check my credit score?
Hopefully you now have a better understanding of what a credit score is and how it’s used. We strongly recommend for you to check your credit score frequently – it’s free and easy. Each of the major credit bureaus (Experian, Equifax, and TransUnion) will provide you with a free credit report every year if you request it.
Check your credit score for free with Credit Karma.
What is the difference between a credit score and credit report?
A credit score is a snapshot of your overall financial health and gives you a holistic idea of how your credit is trending – if it’s rising, going down, or in the same place. Your credit report includes a detailed history of your credit use including your credit activity and current credit situation including payback history, debt management, and the status of your accounts. Your credit score is calculated based off of the information in your credit report.
Check your credit report for free on the official Annual Credit Report Website.
Bottom line: your credit score is valuable because it can either save or cost you money and it opens up the door to more opportunities. A high credit score can lead to favorable interest rates – meaning you pay less to borrow money. It’s your responsibility to manage your credit wisely and follow best practices in order to keep your credit strong.
Now that you know the basics of a credit score, learn how to improve your credit score.
Remember: You are more than a number.
Your credit score doesn’t define who you are. You’re not alone in your financial journey! At Alltru, we believe in giving everyone the opportunity to better their financial well-being and giving people a safe way to bank and borrow money. We are passionate about offering accessible financial tools to all communities in order to build a stronger St. Louis and create financial stability for all.