Welcome to professorsavings.com, we teach finance basics. Today we will teach you what credit score is.
Hi I’m Rayfil Wong. We hope these investment concepts will help you be a better investor.
Planning to borrow money any time soon or down the road? You’ll need to know what a credit score is.
In short, it offers a snapshot of your personal debt repayment history at a single point in time, letting potential lenders know what type of risk they would be taking by loaning you money.
The numerical value of the scores also known as FICO scores ranges from 300 to 850. In general, the higher the score, the lower the risk.
A lower score doesn’t necessarily mean you can’t get a loan but you will probably have to pay a higher interest rate or be approved for a lesser amount than someone with a high score.
So what factors can affect your credit score? You may be surprised. Your payment history is certainly important as is the length of your credit history, any new accounts that have been opened, the number of recent credit checks, and how many accounts you haven’t used.
Yes, this does include all of those department store credit cards offering deals seemingly too good to pass up.
Bottom line: any recent activity on your credit file will affect your score. So what’s a responsible consumer to do? Paying your bills on time and not overextending are the best places to start so when you do need that big loan, your credit score will help you instead of standing in your way.