Why is Your Credit Score Important?

Your credit score is a mathematical calculation used to determine your credit-worthiness.

The formula used to calculate your credit score includes information based on several factors, such as your payment history (which is the most important factor), the amount you currently owe lenders, the length of your credit history, and the number of new credit accounts you've opened or applied for recently (fewer is better).

Also considered is the mix of credit accounts you have (mortgages, credit cards, finance company loans, and so on).

A credit score ranges between 300 and 850. The higher the credit score, the better. A FICO credit score over 750 is excellent; above 720 is very good. An acceptable credit score is in the range of 660 to 720.

Why is my credit score important?

Your credit score is important because it determines how much you will pay to borrow, and whether or not you will even be able to qualify for a loan.

With a good credit score you will probably qualify for a larger loan, and at a lower interest rate. With an average credit score you may still get the loan, but you may need a co-signor, and you may pay a higher interest rate.

There are many places that advertise a free credit score or a free credit score online. Some of these places are reputable; some are not. Investigate your options when it comes to researching your credit score.

Remember, common sense is your most important asset. If you pay your bills on time, don't apply for too much credit, and don't carry too much debt, you will have a good credit score, which will allow you to qualify for the loans you need.

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