MORE LIKE THISThe Ultimate Credit Score GuideMaking MoneyPaying Your BillsPersonal Finance
Your credit scores determine a lot more than the loans you can get and the interest rates you pay. Insurers use credit scores to set premiums for auto and homeowners coverage. Landlords use them to decide who gets to rent their apartments. Credit scores determine who gets the best cell phone plans and who has to make bigger deposits to get utilities.
Credit scores are a financial tool, in other words, but whether they’re a lever or a hammer depends on how good they are.
Get score change notifications
See your free score anytime, get notified when it changes, and build it with personalized insights.
You can leverage great scores into great deals — on loans, credit cards, insurance premiums, apartments and cell phone plans. Bad scores can hammer you into missing out or paying more.
Having good or excellent credit can provide significant savings over your lifetime. For example, you could save:
$86,065 in interest on a $350,000 mortgage with a credit score of 750 or above compared with someone scoring 630-689, according toNerdWallet calculationsusing interest rates for a 30-year fixed-rate loan in July 2023.
$3,251 in interest on a five-year, $41,000 auto loan with a score of 720 or above, versus someone scoring 660-689, from FICO calculations using July 2023 rates.
$885 in interest on a three-year personal loan of $10,000 when scoring 720 or above compared to someone scoring 630-689, based on anonymized offer data from NerdWallet's lender marketplace.
Since credit scores have become such an integral part of our financial lives, it pays to keep track of yours and understand how your actions affect the numbers. You can build, defend and take advantage of great credit regardless of your age or income.
How credit scores work
A quick tutorial: Most people don’t have one score; they have many, and the scores change all the time.
Your scores also differ based on the scoring formula used and which of the three credit bureaus supplied the information used to create the score. If you want to track your credit score progress over time, monitor the same type of score from the same bureau.
You don’t have to pay for a score; you may be able to get a FICO or VantageScore for free from your credit card issuer or your bank. Financial sites such as NerdWallet also offer a free credit score, typically VantageScore 3.0, which measures the same behaviors that a FICO does.
Build credit without debt
Millions of people don’t have credit scores because they haven’t used credit, or haven’t used it recently enough to generate scores. Two ways to build credit include:
Apply for a credit-builder loan, which places the money you borrow into a certificate of deposit or savings account that you can claim after you make 12 monthly payments. Many credit unions and community development financial institutions offer credit-builder loans, as does online lender Self Lender.
Apply for a secured credit card, which gives you a line of credit equal to the amount you deposit with the issuing bank, also helps build credit.
Once you have a score, you can use a credit score simulator to see what actions might help and hurt it.
Grow credit with good habits
Good credit habits include:
Paying your bills on time is crucial to growing your scores. Nothing counts more.
Light but regular use of your credit accounts is also important. Know your credit limit on each card and charge no more than 30 percent of that limit.
Pay balances in full if you can. There’s no need to carry debt when your goal is growing your scores. If you do carry balances, try to pay them down as quickly as possible.
Avoid closing accounts if you’re trying to improve your credit. Once your scores are high — over 760 or so — you can shutter an account or two without major damage, but try to keep your highest-limit credit cards open.
Maintain and defend your scores
You have a lot to lose once you have good scores, generally 690 or above.
A single skipped payment can knock more than 100 points off your numbers. Consider putting all your credit accounts on auto-payment to prevent a misstep.
A collection account or lawsuit judgment can dent your scores as well.
Identity theft can devastate scores, a good reason to monitor your credit report. You can get free credit report information through NerdWallet, updated weekly. You are also entitled to free weekly reports from all three major credit bureaus using AnnualCreditReport.com.
Get more financial clarity with NerdWallet
Monitor your credit, track your spending and see all of your finances together in a single place.
Register
Take advantage of your good credit
Once your scores near 700 or so, you’re considered a good risk. When they’re over 760, you’re golden. You should expect the best rates and terms lenders have to offer, since they’ll be competing hard for your business.
Reconsider your auto insurance as well, especially if your credit has improved substantially since your policy was set up. Your current insurer may not check your credit at renewal time; ask it to re-run your rates. It’s a good time to shop around as well.
With all the money you save, you can make progress on important financial goals such as saving for retirement, boosting your emergency fund or getting out of debt faster.
That’s the real power of great credit scores. Instead of begging for loans, paying too much and trying to make do with what’s left over, you’ll finally have some options to get ahead.
This article was written by NerdWallet and was originally published by The Associated Press.
A credit score is usually a three-digit number that lenders use to help them decide whether you get a mortgage, a credit card or some other line of credit, and the interest rate you are charged for this credit. The score is a picture of you as a credit risk to the lender at the time of your application.
Lenders, businesses, and other entities may look at your credit report and credit score to help decide how financially trustworthy you are. Thus, establishing good credit can help you get approved for loans or a credit cards, earn lower interest rates, get approved for higher lines of credit, and more.
Checking your credit score on NerdWallet only prompts a soft inquiry on your credit report - not a hard inquiry - and will never impact your score in any way, no matter how often you check it. This article includes more detail about this: Does Checking My Credit Score Lower It?
According to Experian data, baby boomers and other older consumers comprise 66% of the consumers with 850 FICO Scores, and Generation X another 26%. Millennials and younger consumers, so far anyway, account for less than 8%. In brief: The summit isn't out of reach.
Why your credit score matters. You can leverage great scores into great deals — on loans, credit cards, insurance premiums, apartments and cell phone plans. Bad scores can hammer you into missing out or paying more. Having good or excellent credit can provide significant savings over your lifetime.
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
FICO scores are generally known to be the most widely used by lenders. But the credit-scoring model used may vary by lender. While FICO Score 8 is the most common, mortgage lenders might use FICO Score 2, 4 or 5.
Along with many other pieces of information, potential lenders, and creditors – including credit card companies, mortgage lenders and auto lenders – may use your credit scores and credit history to help make lending decisions. These companies want to know how likely you are to pay the money they lend back as agreed.
Is NerdWallet accurate? The accuracy of the information displayed is entirely dependent on the accounts you link with NerdWallet. To see the most accurate information, connect all of your bank accounts, credit cards, loans, and your home value, where applicable.
Consider whether your primary concern is tracking your finances or managing your credit score. Credit Karma is likely the best option for you if your primary concern is managing or improving your credit score. If your primary concern is budgeting and finance tracking, NerdWallet is likely the better choice.
Recurring late or missed payments, excessive credit utilization or not using a credit card for a long time could prompt your credit card company to lower your credit limit. This may hurt your credit score by increasing your credit utilization.
How many Americans have an 850 credit score? Only 1.31% of Americans with a FICO® Score have a perfect 850 credit score. While a score this high is rare among any demographic, older generations are more likely to have perfect credit. Baby boomers make up a whopping 59.4% of the people with an 850 credit score.
A score of 850 can only be achieved with 10+ years of credit, excellent on-time payment history, low credit utilization, and no recent hard inquiries, which is a tall ask. At the very least, you can take these 12 steps to improve your score.
Good credit can be the make-or-break detail that determines whether you get a mortgage, car loan or student loan. Bad credit, on the other hand, will make it difficult to get a credit card with a low interest rate and more expensive to borrow money for any purpose.
Lower interest rates on big ticket items mean significant savings. Higher credit scores generally mean lower interest rates on mortgages and car loans. For these big purchases, savings can amount to thousands (or tens of thousands) of dollars over the life of the loan.
Your credit score isn't as important if you're retired and don't plan to borrow money anymore. However, there are still ways it can affect your life, such as impacting how much you pay for car insurance.
Here are just a few: Interest rates: If you ever want or need to borrow money (for a mortgage or auto loan, for instance), you'll likely get better interest rates with a higher score. Additionally, you'll likely find it easier in general to be approved for financing if you have a well-established credit score.
Address: Apt. 203 613 Huels Gateway, Ralphtown, LA 40204
Phone: +2135150832870
Job: Regional Design Producer
Hobby: Nordic skating, Lacemaking, Mountain biking, Rowing, Gardening, Water sports, role-playing games
Introduction: My name is Fredrick Kertzmann, I am a gleaming, encouraging, inexpensive, thankful, tender, quaint, precious person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
