When it comes to your credit score, what you don’t know could hurt you.
Errors on your credit report can greatly affect your credit rating, and a low rating could determine whether you get a loan for the house or car you’ve been eyeing.
Keeping Score
When you apply for a loan or line of credit, lenders typically request a credit score and a copy of your credit history from one of the major credit bureaus. Your score reflects the likelihood that you will repay the loan and helps lenders determine whether you are a good risk.
Credit scores can range from 350 (extremely high risk) to 850 (extremely low risk). If you have a low score, lenders will charge a risk premium in the form of a higher interest rate on the money you borrow. A higher score can mean lower interest rates and lower payments for you.
To help ensure that you have the highest possible credit score, consider these simple strategies:
– Arrange minimum payments. Most lenders allow you to set up automatic payments from your checking account. This is not only convenient, but it can also help eliminate late payments.
– Keep credit cards in good standing active A proven track record with a number of credit cards shows lenders that you can manage credit effectively.
– Don’t jump to zero. Paying off one credit card with another that promises low interest rates may sound like a good idea, but it could cost you in the long run. You may be racking up fees and higher interest rates. Frequent transfers could also negatively impact your credit-card balance-to-limit ratio.
By keeping spending habits in check and managing your credit wisely, you may be able to get the loans you need when you need them. You could also earn higher credit limits and lower interest rates.
You can request a free annual credit report online at www.annualcreditreport.com.
You can also order credit reports from www.equifax.com, www.experian.com or www.transunion.com.