If you ever wondered about your credit score, then you're not the only one. According to ZILLOW POPULATION SCIENCE, the average American knows as little as two things about credit scores. That gap is wide-ranging and applies to all ages. Boomers, Gen X'ers, and Gen Z'ers were less educated about credit than Generation Z'ers. Continue reading to find the answers you need about credit scores.
Commonly asked questions about credit scores
Your credit score could make a huge difference in your ability to apply for loans or apartments. It's important to know what it is and what it means to you if you plan on reaching your financial goals. Credit scores are determined by a variety of factors including credit utilization, payment history and debt. Lenders can also determine your likelihood of making future payments with borrowed funds by assessing your credit score.
How to find your score
Lenders use your credit score to determine if you are a risky borrower. It can range between 300 and 850. This score tells lenders whether or not you will be able repay loans. The score is affected by your credit history, so it's important to keep track of it regularly.
Comparison of hard inquiry and soft inquiry
There are two types to credit inquiries: a "hard inquiry" and a "soft inquiry". Each type of inquiry has a different impact 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 lower your credit score by zero to five points, depending on your personal credit history. It is important not to apply for credit again if you do not need to.
Impact of hard inquiry on your credit score
Hard inquiries are made on your credit reports when you apply for a loan. 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 also show that you have applied for credit within the past two years.
A good credit rating
One of the most important aspects of maintaining a good credit score is paying your bills on time. Late payments can negatively impact 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.
Know your score before you apply for a loan
It's important to know your credit score before applying for a loan, because it can affect your loan application. It can also give insight into how your finances are managed. To determine your repayment behavior, most lenders will look at your credit score. Your credit score is only one component of the puzzle. Lenders can also consider your income which can impact your score. By regularly checking your credit score, you can spot red flags and avoid being taken advantage of.