A Beginner’s Guide to Credit Scores

Do you know what your credit score is? You probably do, because that little three digit number is almost as important as your Social Security number when it comes to getting things like a job, a home, a car, insurance, or a credit card. This number can change, depending on the state of your credit. If your credit is AAA, you will have the highest possible credit score. If your credit is not so good, then you will have a pretty low credit score. A score of 760 or above is considered excellent, while a score below 620 will tell anyone who checks that you are a bad credit risk.

Why is your credit score so important? If you want to take out a loan or get a credit card, your chances are a lot higher if your credit score is on the high side. If your credit score is low, it will be difficult, though not impossible to get credit. You will just have to pay more than most people for the things you want in the form of high interest rates tacked onto loans. About the only type of credit card you can get with a low credit score is a secured credit card, where you have placed money in an account to secure your credit. If you want a card with a $1000 limit, then you must put $1000 in the bank.

A high credit score means that your payments on your credit cards, car, mortgage, insurance, and even your cell phone will be lower. With a high credit score, you don’t have to worry about paying a deposit for utilities like electricity, gas, water, telephones and the like. You also don’t have to worry about not being approved to rent that apartment or home with a good credit score. Landlords will check your credit score before renting to you to insure that you are conscientious enough to pay your rent on time. They figure that if you pay your bills late, your rent will be late, too.

More and more employers are performing credit checks on each applicant they get for a job, especially in the retail sector where you will be handling money. You will know that your credit is going to be checked when you apply for the job, as you will have to sign a form that gives your consent before the employer can proceed. Many a person who was well qualified for the job and thought they had it “in the bag” has been dismayed to find out that bad credit kept them from being hired.

It’s a good idea to check your credit report once a year in order to keep on top of your credit score. Most people have a pretty good idea of their credit standing and also how much money they owe to creditors, but your credit report will list everything that has been done in your name, and could help you to deter identity theft. There could also be other mistakes on your report that need to be corrected.

You can get a free copy of your credit report once per year from each of the three credit reporting companies.

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