Before we begin looking into ways to improve your credit scores, let’s delve into what exactly the credit score is. Your credit score, also known as a FICO score, is based on reports generated by the three major credit bureaus, which themselves are based on information supplied to them by lenders, who report on all aspects of each of their accounts. All of these information is constantly being gathered, removed and updated, with your credit score being based on obvious factors relating to these accounts, such as your current debt and general payment history, and other factors you may not even have considered, such as the number of accounts you have open (the less the better). Now that you have a general understanding of credit scores, let’s look at some of the many ways that score may affect your life.
1 A better credit score gives you more mortgage options. Indeed, with banks becoming ever more cautious in the wake of the current mortgage crisis, it’s now extremely difficult to get your hands on a mortgage without a good credit score, let alone one with a decent interest live score rate. Improving your credit score to the point where it reduces your mortgage rate by just 1% would save you nearly $50,000 over the life of a 30-year fixed mortgage on a $200,000 home. That should be plenty of incentive to work on your score if you’re planning on entering the mortgage market.
2 Pay less for a car lease. Your auto loan interest rates are directly based on your credit score. Raise that score and watch the rates tumble, to the point where you could afford a much more expensive car for the same monthly payment.
3 Beyond just your auto loan itself, your car insurance rates are also affected by your credit score, so car owners can help themselves out doubly by improving their credit scores. High scores make insurance companies less concerned about the threat of you taking them to task on their protection.
4 Continuing the insurance theme takes us to life and health insurance, and these too are affected by your credit score. Having a better score makes you more likely to pay your premiums, which makes you more attractive to the insurance companies. They also view higher scores as being at a lesser risk of actual making use of the coverage, potentially in a fraud related manner.