Simple Money Truth # 7: You Are Your Credit Score
Your credit score is the single most important tool institutions use to determine your creditworthiness.
Without a credit score of 700 or over, you won’t get the best rates on mortgages and car loans, and you may not get that apartment or job that you dream of.
Your credit score can also affect the price you pay for auto insurance. A low credit score can prevent you from getting what you want or make what you get much more expensive!
If you don’t know your credit score, do this:
Pull your credit report from each of the three credit reporting agencies: Experian, Equifax and TransUnion. You can do this by going to annualcreditreport.com, which is a government-approved site that will get you free access to your credit report. Warning: Ignore all solicitations to buy anything when you are accessing your credit report on annualcreditreport.com. Just get your free report.
Unfortunately, you won’t get your credit score on the credit report. But you can get that information for free from websites such as Credit Karma or myfico.com. Remember, don’t buy anything you don’t want when visiting these sites!
At this point, you have access to what lenders see when they pull your credit report. What is your score? If it is below 700, you have some work to do. If it is above 700 — congratulations! Keep up the good work, but be ever vigilant and know that 750–850 is considered excellent, so you have something to strive for if you aren’t there yet.
Fortunately, Your Credit Score Is in Your Hands to a Great Degree.
If your credit is less than stellar, you can turn it around with some work. Most importantly, always pay all your bills on time. Use your credit cards, but pay them off in full each month. It’s beneficial to have different types of credit: a credit card, a car loan, and a mortgage, for example. If you are young or can’t get a credit card for other reasons, establish a secured credit card with a bank. This is a card backed by your savings, and will help you to reestablish a good credit history.
For more information on credit scoring, visit www.myfico.com or www.creditkarma.com, or read these recent articles:
- Your Credit Score May Soon Look Better – The New York Times
- Little Credit History? Lenders Are Taking a New Look At You – The New York Times
- Here’s How Your Credit Score Really Gets Set – Bloomberg
Editor’s note: This post was originally published on January 12, 2011 and had been updated for accuracy and timeliness.