In the United States, have a strong credit history is the “sesame” that will make your life better by getting access to a lot of benefits and privileges.
But few Americans really know how the system works and have outstanding misconceptions about their credit.
What is really the Credit Score?
The credit history is the record of your paid borrowed and repair debts. Your credit report include information about your previous credit performance, your current level of indebtedness, type of credit use, defaults, bankruptcies, lien, judgments, charge-offs, the frequency of your payment and other information.
A credit score will help lenders to evaluate your credit report because it summarizes your credit risk according to a snapshot of your credit report.
How bureaus build credit score?
Credit score are often called “FICO Scores” because most credit bureaus in the United States are produced from software developed by FICO, and ranges from 300 to 850.
The score is calculated by a mathematical equation that evaluates information from your credit report. FICO compares this information to the patterns in hundreds of thousands of past credit reports and then the score estimates your level of future credit risk.
What is a good Credit Score?
There are many different credit score models; some of these have different credit score ranges. A good or fair credit score will depend on bow the lender views it, but there is an example using the range from Credit.com’s credit card comparison tool:
- Excellent (750+)
- Good (700 – 749)
- Fair (650 – 699)
- Poor (600 – 649)
- Bad (below 599)
Why the credit history is important?
Having a good credit history will allow you to get access to low-interests loans and offers in the near future. People and businesses will use this record to judge what they can risk making an agreement with you. It can be the case for your future employers, your landlords or insurers.
Here 5 benefits of having a great credit:
- Access to lower financing rates on a car lease: If you are looking for a new card, dealers will be happy to offer you a low price lease because they will be sure that you will be to paying back on time.
- Better chance for credit card and loan approval: Having an excellent credit score gives you a very good chance of being approved for a new credit card or a loan.
- Increase your negotiating power: With a good credit score you can often negotiate a lowest rate on your credit just by referencing your good credit score.
- Get approved for higher limits: With a good credit score you have demonstrated that you pay back what you borrow on time. If you have a bad credit score you will be approved for a small amount, which will be not enough to accomplish your goal.
- Better car insurance rates: My may don’t know but with a high credit score you will pay less than for insurance than applicants with lower credit scores.
- Attractive mortgage: It will be easier for you to extend your home loan when your credit score and if you have a clear history.
Now that we highlight the main point of the Credit, we will see in our next article the benefit to use PAYTOO Safe to improve your Credit Score.