There are a lot of questions about credit score ratings, and a lot of misconceptions (credit score myths) as well. It’s important for you to know just how credit score ratings work and why they are meaningful. Here are some facts and myths about credit score ratings for you to consider.
If you’re interested in owning a car, a house, or a business, if you’re interested in getting a loan for college tuition or home improvement, lenders will use your credit score in order to determine whether or not to extend you the loan and at what cost. Find out for yourself what your credit rating is, so you aren’t in the dark. There may be easy steps you can take to improve it. Staying on top of your credit is the only way to know when and if you can get the loan you need for the things you want.
If you are in the highest credit score ratings group you will get a better rate than those in a higher risk group, but you won’t necessarily get a rate better than the guy who is ten points lower than you on the scale. Lenders use these scores to mitigate risk, not to reward individual performance, so everyone that is lumped into the same default percentage category may be offered the same or similar terms.
It can be hard to improve your credit score, but it’s far from impossible. What’s required is an honest assessment of your finances and debts, along with a strict commitment to budgeting and paying your bills. Showing responsible credit practices over several months is surefire way to raise your score.
Only the report is free, not the score. You are entitled by federal law to get your credit report from a credit reporting bureau once a year without having to pay for it. However, this report does not come with a score. To get the score, you will have to pay extra, and you may not be able to get the scores from the other credit bureaus (which may vary slightly). CreditScore.com provides free credit scores with access to the report.