As you travel through life, one of the numbers that becomes important to you is your credit score.
Lenders use your score as an indicator of how likely you are to repay a debt, which is pretty significant when you want to do something like take out a credit card, finance a car or purchase a home.
So how does it work?
Credit reporting agencies such as Equifax, Experian and TransUnion calculate credit scores from the information in your credit reports. Most are measured within a range of 300 to 850 and, the higher your score, the less of a lending risk you are deemed to be.
Lenders refer to these scores to help them make decisions when you apply for financing. If approved, they’ll typically impact the terms offered including how much you can borrow and the rate of interest.
Credit scores may affect other areas of your finances, too, such as whether you can get approved for auto insurance, an apartment or cell phone contract.
Read on to find out where to get your score, and how to build and keep a good score.
How to get your credit score
Check your credit card or loan statement
Many credit card companies and some loan companies provide credit scores within their customers’ online accounts and monthly statements. Log in or view your last statement to see if you have yours.
Talk to a credit counselor
Non-profit credit counselors can often supply you with your credit score as well as a copy of your credit report for free. Credit counselors are generally available through local offices, online or by phone.
Use a credit service
Another option is to use a credit score service, including online services, some of which are free while others charge a fee. Those that charge may ask you to sign up for a monthly credit monitoring subscription, so make sure you check first.
How to get and keep a good credit score
The Consumer Financial Protection Bureau offers the following tips for building and maintaining a strong credit score.
Make your payments on time
Timely payments are important to your score, so if you have missed any payments, try to get up to date and stay current. Consider setting up automatic payments or payment alerts.
Don’t get too close to your credit limit
Use no more than 30 percent of your overall credit limit. If you close some credit card accounts and put all of your balance onto one card, you may move closer to your total credit limit and reduce your credit score. Paying off your balances each month will help your score.
Only apply for the credit you need
Applying for a lot of credit in a short period of time could suggest to lenders that you’re experiencing financial difficulties. It’s recommended to only apply for the credit you need.
A long history helps
As credit scores reflect credit habits, the longer you can demonstrate a solid track record the better.
Check your credit reports
It’s also a good idea to get a copy of your credit report to check for errors that could harm your score. If you suspect any, report them. You can request a free copy of your report from Equifax, Experian and TransUnion at AnnualCreditReport.com. They’re normally available from each bureau once every 12 months but can be obtained weekly during the Coronavirus pandemic.
To learn how Chrysler Capital handles customer credit information, visit About Your Credit.
With 10 years of experience in auto finance, Rob Looker helps car shoppers find the right vehicles with the right financing so they can enjoy the road ahead. When he’s not creating content, he’s often behind the wheel, exploring new places.
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