Your credit score. Chances are you either love it or hate it. It’s either the greatest thing in the world or a total hindrance.
Or, maybe you don’t really know enough about your credit score for it to make an impact on your life.
As a whole, Americans’ credit scores are beginning to increase but our knowledge of credit and how it works is declining. A recent survey from credit scoring company VantageScore and the Consumer Federation of America found that 32% of the people surveyed didn’t know they had more than one credit score. That percentage has risen by about 16% since 2012.
Your credit score is a three-digit number ranging from 300 (the lowest possible score) to 850 (the highest score). Lenders use your credit score to make decisions about whether or not to offer you credit – such as a credit card, car loan or mortgage loan. Your credit score is also used to determine the terms of the offer – what your interest rate will be and whether or not you’ll have to make a down payment.
The average credit score in the United States ranges between 670 and 710. According to Experian, a “good” credit score is anything that falls between 661 and 780, which is about 38% of the population. To put that into perspective, to qualify for an FHA mortgage loan, your credit score has to be a 580 or higher with a 3.5% down payment. Usually, if an applicant falls in that “good” credit range, they’re likely to be approved for credit at competitive rates.
Think of your credit score like a report card you used to get while you were in school. Your report card measured your progress during the school year, and your credit activity puts you into a scoring range. But, unlike grades, credit scores aren’t stored as part of your credit history. Instead, your score is generated each time you apply for credit. Fun fact: it actually negatively impacts your credit score if you have multiple inquiries in a short period of time.
What are your major financial goals? Buying a home? Buying a car? Chances are, your credit is likely going to be a factor in framing that financing picture. Your score will actually tell a lender whether you qualify for a loan and how good the terms of the loan will be. For instance, the lower your credit score is, the higher your interest rate on a car loan will be. If you’ve looked at your credit report, and you’re surprised to see it’s lower than you thought, don’t worry.
Credit doesn’t have to be scary or overwhelming. There are many responsible ways to start out slowly and build worthwhile credit for the future. Maple Federal Credit Union can help. Are you looking for help building or establishing credit? We have a number of ways to start you on the right path. Let us help you! Stop by one of our branches today or give us a call to see what options we have.
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