Perhaps you have been searching for car deals online, and you come across a short questionnaire that determines if you can be pre-approved for an affordable car deal.
Did you know that these car dealers, along with many other companies, are able to determine your eligibility to receive such privileges, because of your credit score?
What exactly is your credit score anyway? How does it affect you in terms of your relationship with other institutions that involve finances?
In reality, understanding what your credit score means is not a very difficult thing to do. Some sources try to explain it this way, your credit score lets these other companies know if you will be able to pay them or not.
You may ask, in what situations are these applicable? For example, if you are applying for health insurance , and you want a comprehensive plan to take care of your medical expenses when the need arises, your insurance agent will check on your credit report score. If you have good credit, expect to get a good rate on your insurance, and expect to be approved for the comprehensive coverage you are applying for.
Here is another good example, if you want to purchase a home, but you don’t have a huge amount of money available to pay for it, you can get a mortgage loan for that house. What is a mortgage loan, and what does it have to do with your credit score?
When you apply for a mortgage loan, it means that your lender or mortgage company will loan you the needed amount to purchase that house, and that said house will be used as collateral. Collateral offers security to the lender in case you are not able to pay the mortgage loan.
When you get a mortgage loan, how much do you expect to pay per month, and what mortgage interest rate will be set for you? If you have a good credit report score, or excellent credit rating, you can be readily approved for the mortgage loan you are applying for, plus you will be able to find reasonable payment terms, and a low mortgage interest rate, simply because you have a good reputation as stated by your credit score.
So what is a good credit score, then? There are many standards of credit scores being followed, but you can take a look at the FICO credit score system to have an idea of what is a good credit score. The Fair Isaac Corporation (FICO) has ranges from 499 to 999, for credit scores.
On the average, about 27% of Americans fall within the bracket of 750-799 as their credit score, and that is a healthy one to be in. You can find out your credit score by getting a copy of your free annual credit report, which you can apply for online. Your free annual credit report will be very useful for you, especially when you are getting loans, so find out the sites that offer this convenient service for free.