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Your
credit score is a 3-digit number calculated
off the information in your
credit report. Your credit score is integral
in helping lenders determine how much of a credit
risk you are. Basically, a low credit score
indicates that you present a higher risk of
defaulting on your debt obligations than someone
with a high score.
Credit scores range from a low of 300 to a high of
850. If your’s doesn’t register near the top,
you’ll probably never be offered the best
interest rates or the lowest insurance
premiums and you might even be passed over for a
job.
If on the other hand, your credit score is near
the top, you’ll definitely reap the benefits.
Those who issue credit will clamor for your
business. They’ll make you the best offers they
can to get your business. If you’re not happy with
what you’re offered from one, you’ll likely get a
better offer from someone else, if you shop
around. You’ll have the upper hand because you’ve
proven that you can responsibly manage your
credit.
The formula used for calculating your credit score
is complicated and not many people understand all
that’s involved. That’s okay. What’s important is
to know how to keep your credit score in good
standing. First in line of importance is paying
every bill you have on time. Notice of a late
payment on your credit report can cause a
significant drop in your credit score.
And so can opening a lot of new credit accounts in
a short amount of time. Even if you don’t abuse
them, the possibility that you could potentially
charge each one up to the limit is a serious red
flag to lenders.
Another way to keep your credit score from
dropping is by having low balances. The higher
your debt-to-credit limit ratio, the lower your
score. And as tempting as low-interest
balance transfer offers are, paying down your
debt is better than moving it around.
Longevity helps boost your credit score too. The
longer you’ve been establishing a favorable track
record definitely helps as do accounts that have
been open for many years and that are in good
standing.
If you’ve had problems in the past, it’s possible
to reestablish your
credit history and by doing so get your credit
score moving in the right direction. It’ll take
time, determination and responsible credit usage,
but in the long run, it’ll be worth your efforts.
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