Whether you’re getting ready to buy a new car, a new home or apply for a loan, you need to have a credit history. This history shows lenders your creditworthiness and is usually represented as a three-digit number or score that indicates the likelihood that you’ll repay what you borrowed. Better scores usually lead to better loan terms and interest rates, so here are some things to know.
Establishing a History
First, you’ll need to establish a record as a borrower. Many people will do this by opening a secured credit card or taking out signature loans or installment loans Mississippi. These are relatively easy ways for you to start borrowing money that can be easily repaid to demonstrate that you’re responsible when it comes to paying it back.
Understanding Your Score
Your credit score is tracked by three reporting bureaus, namely Experian, Equifax and TransUnion. Different lenders will check with one of the bureaus to see this rating. While each entity has its own criteria, these are the general ranges for your score:
- Exceptional: 800 and above
- Very good: 740 – 799
- Good: 670 – 739
- Fair: 580 – 669
- Poor: 579 and below
Borrowers with the best scores usually get the best interest rates and most favorable terms and conditions.
Practicing Good Habits
To establish high scores, you need to pay your loans on time consistently. Using too much of your credit line, having too many new accounts or conducting many inquiries can negatively impact your scores. As you establish a borrowing history, a good mix of account types, including credit cards, loans and say, a mortgage also helps.
Credit is a fact of life. Having a strong record of borrowing money and paying it back helps establish you as a reliable, trustworthy debtor. Get into the habit of paying your loans back on time and in full.