Have you ever been uncertain about what the point of a credit score is? And how do you improve it? A credit score is a number that represents your creditworthiness. Basically, lenders use it to decide whether or not they want to offer you credit, like in a loan or credit card, and what kind of offer they’ll give you. The better credit score you have, the better deal you get, like a lower interest rate or down payment.
There are multiple credit scores you might get, because there are multiple credit-scoring companies, such as FICO or VantageScore. Depending on the loan you’re getting, you could have yet another score. Don’t worry about checking your score through credit-monitoring tools, such as through your bank account’s extra tools online. Only hard inquiries, like you would get when applying for a credit card or loans, will cause a dip in your score – but even that’s temporary.
Some people believe closing your unused card accounts can improve your score, but the average age of your accounts is a big part of it. So keeping your oldest card accounts can still help. Along those lines, only apply for new lines of credit as needed – you don’t want too many hard inquiries, or any more temptation to overspend. Lastly, paying your bills in full and on time might not build your credit much, but it’s still important, because if you don’t then your score will be hurt by it.
Credit unions like SunWest have “credit builder loans” to help you establish credit or improve your current score. The payments you make on the loan go into a certificate, and once you pay off the loan the funds are all returned to you. It’s a simple way to add to your payment history that’s being reported to the credit bureau.
Now that you know what a credit score is, check out your own. Generally, a good credit score is above 700, and if you’re above 760 it could be considered excellent. The higher the credit score, the better rates you’ll get when making big purchases, like buying a home or a car. If you need to improve your score, start working on some of our suggestions now so you can benefit sooner rather than later!