If you've ever wondered about your credit score, you're not alone. ZILLOW POPULATIONSCIENCE reports that the average American only knows two things about credit scores. This gap exists across all age groups. Boomers and Gen X'ers were even less knowledgeable about credit than Gen Z'ers. Read on for the answers to some of the most common questions about credit scores.
Common questions regarding credit scores
When applying for loans, jobs, or apartments, your credit score is a major factor. If you are serious about achieving your financial goals, you need to be aware of what it is. Credit scores are determined by a variety of factors including credit utilization, payment history and debt. Your score also tells lenders how likely you are to make future payments on borrowed funds.
How to find your score
The credit score is the number that lenders use to determine whether you're a good risk for them to lend money to. It can range between 300 and 850. This score tells lenders whether or not you will be able repay loans. Credit history is a major factor in your score. It's important that you keep track of it.
Hard inquiry vs. easy inquiry
There are two types if inquiries that you can make on your credit report: a hard inquiry or a soft inquiry. Both can have different consequences on your credit score. Hard inquiries are when you apply to borrow money, such as a mortgage, student loan, car loan or student loan. A hard inquiry can lower your credit score by zero to five points, depending on your personal 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 indicate to potential lenders that you are actively seeking credit. This will hurt your score because it will appear on your report, regardless of whether the application is approved or rejected. Hard inquiries are also a sign that you have applied to credit in the past two year.
A good credit rating
One of the most important aspects of maintaining a good credit score is paying your bills on time. If you're late on one or more payments, it will reflect negatively on your credit score. Paying your dues is what will determine more than 30% of your credit score. Automatic payments will help you avoid falling into the trap of forgetting your payment.
Before applying for a mortgage, you need to be aware of your credit rating
Before applying for a loan you should know your credit score. This can impact your application. It provides information about how you manage your finances. Lenders will use your credit score as a guideline to determine your repayment history. However, your credit score is only part of the equation. 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.