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A good credit score is important for everyone, from the average consumer to an entrepreneur. If you're trying to start a business or expand your business and your credit score isn't good enough, then you're going to have a hard time getting the funds you need.
This article will look at what a credit score is, why it's important, and how you can raise it.
What is a credit score?
In the United States a credit score is used to predict the likelihood that an individual will pay back money that is owed. Most creditors and lenders have a minimum credit score requirement. Your credit score is determined by a credit reporting agency using a mathematical algorithm that considers various factors including your payment history, outstanding debt and credit limits. A credit score can range from 300 to 850, as determined by the Fair Isaac Corporation. A credit score of 700 or above is generally considered good and scores above 750 are exceptional.
Why your credit score is important
Did you know that your credit score can actually make or break your chances of getting a mortgage loan? A bad credit score can also mean a higher interest rate on your car loan or a higher insurance premium. A good credit score, on the other hand, can get you cheaper loans and lower interest rates. Your credit score is basically a three digit number that determines your creditworthiness. It’s calculated based on a combination of factors like your income, how many loans you already have and how many late payments you’ve made. The lower your credit score is, the higher the risks are for the lender. That’s why your credit score matters and you need to care about it!
How to get loan interest rates you deserve?
When you apply for a loan, a credit score becomes one of the most crucial things. Loan interest rates are highly dependent on your credit score. If you have poor credit, your loan interest rates will be a lot higher than someone who has good credit. The key to lower interest rates is to increase your credit score.
You can increase your credit score and get the best loan interest rates with the following 5 steps:
- Step 1: Decrease your credit card debt.
- Step 2: Pay your bills on time, every time.
- Step 3: Keep balances on your credit cards below 30% of the available credit limit.
- Step 4: Deal with delinquent accounts and collections.
- Step 5: Continuously monitor your credit score.
How to choose a loan?
When looking at different types of loans, you can use the same factors to compare them: The interest rate, the down payment, the length of the loan, and the monthly payment. When you understand the different kinds of loans, you can narrow down which loan best fits your financial needs.
If you are trying to better understand the time it takes to pay off your loan or perhaps you want to know the additional loan interest that will be paid to your bank or financial provider, then you can use the personal loan calculator to get a breakdown of these details and more.
There are many factors that go into determining your credit score. Some of these factors are under your control, while others are not. It's also important to note that even if you have late payments on your credit report, you can still get a loan with a good credit score.
We all need loans to buy things like homes, cars and to pay for our business. Hopefully this article will help you to take the necessary steps and avoid being overcharged for your loan.
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