Midwest Professional Woman's Group Blog

Dress for Success Midwest Professional Women's Group

What Is a Credit Score and Why Is It So Important?

Posted by Dress for Success Midwest Professional Women's Group on November 19, 2010

Why Should I Care About My Credit Score?

You may not care about it, but lenders and even some employers do. The better your credit score, the lower the interest rates will be on any loans or credit cards you decide to apply for. There are a lot of low-cost services online that enable you to check all three-credit scores at any time. I’d recommend using sites with calculators that show an approximate interest rate for a car or home loan based on your score. That way if you need to develop smart debt you are sure to know you’re getting a good deal.

What Affects My Score?

Are you making payments on time? What is your debt-to-income ratio? In other words, how does your income relate to the amount of unsecured debt you own? The length of credit history can also play a big factor. Keep in mind that five years is still considered short. You’ll need credit history for at least a decade before you’re in the ideal area for lenders. The amount of credit you have is a factor, as is when you took out that credit. If it was recent, it could have a negative effect on the score.
A late payment can hurt your score, but if this happens only on rare occasion, then the impact is minimal. Bankruptcies, foreclosures, and judgments can devastate your score.

How Does Mine Look?

The most widely known type of score is a FICO score. FICO is short for Fair Isaac Corporation and is considered by many to be the most accurate. The three major credit-reporting agencies are Equifax, TransUnion and Experian, who also calculate credit scores.

In general this is how lenders tend to view your score:

Excellent credit = 720 and above
Good credit = 660 to 719
Fair credit = 620 to 659
Poor/bad credit = 619 and below

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