Credit Scores: Everything You Need to Know

Understanding that your credit score can affect you in many different ways, not just when applying for a loan or job, is essential for everyone. Check out some things you need to know about your credit score. Who can view it, what it means to you, and what you can do about it!

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What is a credit score

An individual's credit score determines how creditworthy he or she is. Credit scores are calculated based on the information that is found in one's credit file. Consumers' credit profiles include things like their payment history, the amounts they owe, how long they've had credit, how many new accounts they've opened and whether or not they've been bankrupted or have unpaid court judgments. All of this information is compiled into one three-digit number. The higher your score, the better it will be for you when it comes to borrowing money or obtaining services through loans. 

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The different types of scores there are, including FICO, VantageScore, and others

Before you can improve your credit score, you'll need to know what it is. It's easy to find out by visiting one of the 'big three' credit reporting agencies-Equifax, TransUnion, and Experian. A credit rating agency collects information about your credit history from a variety of sources, like banks or lenders, then assigns an overall score to lenders so they know how risky you are.

Why it's important to check your credit score regularly

Some people pay great attention to improving their credit card scores. You should also check your credit report regularly for errors or fraud. 

The FTC regulations say you're entitled to one free annual report from each of the three major consumer reporting agencies-Equifax, Transunion and Experian. Visit annualcreditreport.com. Freecreditscore.com is also a popular website to check your credit score. 

How to improve your credit score

Calculating your credit score involves a number of variables. Here is some advice to consider if you plan on improving it:

• Keep track of what you spend your money on, and make sure you pay your debts first. It is a good idea to treat credit cards more as a convenience than a necessity, and to pay them off before the due date every month. Additionally, it's important to know how credit scores work, like the total debt-to-credit ratio, individual debt-to-credit ratio, etc.
• Keep your balances low, don't spend more than 10% of your annual income on purchases every month, and don't apply for new cards very often.
• Paying off your bills and closing any unused accounts will boost your credit score before mortgage and loan interest rates are calculated. It doesn't seem like much, but even one month makes a big difference.

If you're trying to improve your credit score, it's important to know the different types of scores and how they work. Don't forget that there are many services out there that offer help with improving a person's credit score as well-but be careful! If in doubt, ask for an opinion from a trusted financial advisor before deciding whether or not to use those services.

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