Your credit score is one of the most important numbers in your finances, and it can affect many of the things that occur in your life. If you’re having a hard time figuring out what your credit score means or just how critical it is in your life, here are five things to know about it.
1. You Have Multiple Credit Scores
While everyone talks about their credit score, you actually have multiple credit scores. Each credit bureau has its own information and its own formula to use when calculating your score. In addition to the credit bureaus, insurance companies use their own formula to come up with your insurance credit score. Credit bureaus all get different information about your finances, so they all come to their own conclusions about what your credit profile looks like.
2. There Are Different Scales
When looking at the various credit scores that you have, it’s also important to know that there are multiple scores. For example, most bureaus use the FICO formula to figure your credit which means that the scores range from 300-850. By comparison, some places use the VantageScore system. This system uses scores from 501 to 990. Their score also comes with a letter grade like you received in school. This makes it difficult to compare apples to apples between the multiple systems.
3. It’s Affected By Many Things
Your credit score is impacted by many different things. For instance, every time you charge something on your credit card and pay your bill, it will have an impact. Every time you make an on-time payment, you’ll be positively affected. Your payment history and your debt load are two of the biggest factors that impact your score. Other things that can make a difference are the length of time that you’ve had credit and the different types of accounts that you have.
4. Your Score Continually Changes
When you get your credit score from a credit bureau, it’s easy to label yourself as someone who has bad credit or good credit. However, your credit score is a dynamic number that is constantly changing. Many different factors impact your score and the credit bureaus update it all the time. So if your credit score isn’t where you want it to be, a few changes can make a big difference. If you already have a good credit score, you can’t get complacent. You always have to be making the right decisions and handling your credit appropriately.
5. Credit Reports Don’t Always Include Score
There are different degrees of credit report that you can find out there, and not all of them come with your credit score attached. For example, if you take advantage of the free credit reports that are available from all three of the major credit bureaus, you’ll get a summary of your credit profile and all of the detailed information surrounding it. However, you won’t get the actual score that is derived from that information. If you want your score, you’ll have to be sure to buy the credit report that has your score with it.
With this information, it’ll be easier for you to build up your credit to a strong level. Take the time to get started now and your score can go up quickly.
This article was written by Denise McKendry, who is the primary writer for the Insurance Rates and Education site, ired.com, which focuses on homeowners insurance and personal safety information.