If you have ever wondered what your credit score is, you aren't alone. ZILLOWPOPULATIONSCIENCE states that the average American is only able to understand two things about credit scores. This gap exists across all age groups. Boomers and Generation X'ers knew less about credit than the Gen Z's. Continue reading to find the answers you need about credit scores.
Commonly asked questions about credit scores
Credit scores can have a significant impact on your ability to get loans, apartments, or jobs. If you are serious about achieving your financial goals, you need to be aware of what it is. Your credit score is influenced by many factors such as your credit utilization, debt, and payment history. Your credit score tells lenders how likely your future repayments on borrowed funds will be.
How to find out your score
Credit scores are the number lenders use to assess your credit risk to decide whether or not you're worthy of their lending. It ranges from 300 to 850 and tells lenders whether you'll be able to repay loans. It is important to track your credit history regularly as it can affect your score.
Hard inquiry vs. Soft inquiry
There are two kinds of inquiries on your credit reports: a hard inquiry, and asofter inquiry. Both have different effects on your credit score. When you apply for a loan such as a car loan or student loan, a hard inquiry is made. A hard inquiry can affect your credit score from zero to five percent depending on your credit history. This means it's important to stop applying for credit if you don’t need to.
Impact of hard inquiry upon your credit score
When you apply for a loan, you trigger a hard inquiry on your credit report. Hard inquiries show a potential lender that you are actively looking for credit. This will negatively impact your score since it will appear on the credit report, regardless whether the application has been approved or rejected. Hard inquiries show that you have made credit applications within the last two years.
Getting a good credit score
Being punctual with your payments is an essential part of maintaining a high credit score. Paying your bills on time will impact your credit score. More than 30% of your credit score is based on whether you make your payments. Set up automatic payments to avoid falling for the trap of forgetting to make your payments.
Before applying for a loan, it is important to know your credit score
Before applying for a loan you should know your credit score. This can impact your application. It also provides insight into how you manage your finances. Most lenders look at your score to determine your repayment habits. However, credit scores are only one piece of the puzzle. Your income is also taken into account by lenders, which could affect your score. By regularly checking your credit score, you can spot red flags and avoid being taken advantage of.