When you apply for a loan in order to buy the house or car of your dreams lenders will look at your Doutor Score. And they will use it to decide if they should give you the loan or not.
There are lots of Americans who don’t know what a credit score is or how it is calculated. If you belong to this group of people, then don’t worry because in this article you will learn all these basic concepts that are necessary to start improving yours and to buy the house or car of your dreams once and for all!
What Exactly is a Credit Score?
A credit score is a number of 3 digits that lenders use as an indicator of your capacity to meet financial obligations such as mortgage payments, car payments, credit card bills, loan repayment, etc. It basically tells lenders how likely you are to pay your debts.
It is usually a number between 300 and 850. The higher the credit score, the less risky you are to lenders. And the less risky you are to lenders, the better interest rates you will get. Also, the higher your credit score is, the more chances you have in getting a loan. Sounds simple right?
A score of 750 or more will give you the best interest rates. And the best chance of being approved for a loan. On the other hand, with a of 600 or less you will have a hard time finding a lender who is willing to give you a loan. And if you find it, you will have to pay a lot of money in interest just because of that low score.
That’s why you have to improve your credit score as soon as possible (if you have a low one or not):
- To avoid high interest rates.
- To save thousands of dollars in interest in the long run.
- And to get the house or car of your dreams at the lowest cost possible.
Where Does It Come From?
Now you are probably wondering “Where does my credit score come from?”. This is a very common question and the answer is simple: Your credit score comes from your credit report.
This credit report is create by the three major credit bureaus in the states. And it contains the history of your payments. The amount of loans that you have, how much you owe, and a few other things.
The bureaus use the information contained in your credit report to calculate your score. The three major credit bureaus use the FICO scoring system, which ranges from 300 to 850.