Credit scores are the most important part of your credit worthiness. If you've taken out a loan or applied for a credit card in Arizona recently, you know this fact all too well. Even if you are lucky enough to qualify for a credit card or loan, a bad credit score may impact your qualifying interest rate - increasing the rate to the point where credit card debt is almost impossible to pay off.
Credit scoring can have an enormous impact on many areas of a person's life. Not understanding the intricacies and nuances of credit scoring can cost a great deal in time, energy and, most importantly, money.
Here are the areas in which credit scores have a specific impact:
- Borrowing money from lenders like financial institutions and banks
- Insuring personal property, vehicles and homes
- Life and health insurance
- Renting property through landlords
- Seeking employment
The area in which your credit score has the most significant effect is credit cards and loans. Most Americans rely on credit to make ends meet each month for transportation, housing and education. This is especially true in times of economic downturn or recession. Low credit scores mean high interest rates which can cost a fortune over the term of the balance.
Banks and financial institutions protect against the risk of default by raising the interest rate for higher-risk borrowers. In many cases, banks use the credit score of the applicant as the primary means of assessing that risk. Therefore, a lower rate can save a borrower a significant amount of money over the term of a loan, mortgage or line of credit.
Where Can I Find My Score?
The best way to understand your own credit score is to look to the agencies that track credit. These agencies are the same ones that banks, employers and landlords contact to get your credit reports.
The most widely used credit reporting agencies are Equifax, Experian and TransUnion. These companies track credit and payments of car loans, student loans, credit cards and other accounts. They also track history of bankruptcy, taxes and discharge of debt.
Best Strategy to Protect Against Disaster
The government offers a credit report once a year for free. Study the report and make sure the information is correct. Contact institutions that are showing missed payments or default. Monitor credit reports for identity theft or fraud. These reports can be found for free at www.annualcreditreport.com.
