Your credit score gives potential lenders an idea about how well you have handled borrowed money up until now. A high credit score is an indication that you’re likely to pay your bills when they’re due and it can open doors to better rates and loan terms. A question you may have is “Can a better credit score help me lower my bills?”
What Your Credit Score Means
Credit scores range from 300 to 850. Scores below 600 are considered poor while scores from 601 to 660 are considered fair. Scores from 661 to 780 are good and if your score is over 781, it’s considered excellent.
Lenders use your credit score to determine whether they’re willing to loan money to you, and if they are, a better credit score may help you to be approved for a loan with a better interest rate and terms. If you’ve had credit problems in the past, your application may not be approved, and if it is, you may be charged a high-interest rate. This can lead to a higher payment month to month and you may pay hundreds if not thousands of dollars more in interest over the life of the loan than someone with a good or excellent credit score.
What Does Your Credit Score Tell Creditors?
Credit scores range from 300-850 and they’re based on a combination of factors. One of the biggest factors is your payment history, especially whether you’ve paid borrowed money back as agreed. If you’ve had credit problems such as past due payments, collections accounts, bankruptcy, or foreclosure, it can bring down your credit score for seven to ten years, which can make it hard to be approved for credit at the best interest rate and terms.
While creditors may differ in what numbers they consider good credit, most see a credit score of 670 or higher as a good score. The higher your credit score is, the better deals you’re likely to be able to get. Your credit score is used in many different situations. It’s used by potential creditors to determine the risk they’re likely taking if they decide to loan to you. It may also be used by insurance companies, potential employers, and cell phone companies.
Bringing Up Your Credit Score
If your credit score needs work, there are actions you can take to bring it up. Paying your bills on time is the most important factor in your credit score. If you have any past-due accounts, work on getting them caught up, and commit to paying on time going forward.
Another factor that affects your credit score is credit utilization. This is the percentage of available credit you’re using. If you’re using more than 30 percent of your available credit, it may be hurting your credit score, so paying down your balances may help. Paying down your total overall debt can also help to improve your score.
Avoid borrowing money you don’t need and limit how often you apply for new credit. Whenever you apply for credit, it shows as a hard inquiry on your credit report. Too many inquiries in a short time can hurt your credit.
If you’ve never borrowed money before and have no credit history, you’re considered a risky borrower. You’ll need to establish a credit history. The easiest way to get started is to apply for a store card, a secured credit card, or a credit builder loan.
Benefits of a Better Credit Score
When you have a poor credit score, you may have difficulty getting approved for credit or you may find that some lenders are willing to loan to you, but only at a high-interest rate. A higher interest rate means larger monthly payments and possibly a longer amount of time needed to pay back a loan. A better credit score also means great deals on credit cards, such as low-interest rates, cash back rewards, and airline miles, which can all contribute to helping you lower your bills.
A better credit score may also help you save on insurance. Some insurance companies operate on the principle that people who have poor credit scores file more claims, which means a good credit score may help you to save money on insurance. A poor credit score may mean you have to pay a security deposit on a cell phone plan or a higher security deposit on a new apartment.
Checking Your Credit Report
Be proactive about making sure the information on your credit report is accurate. Misinformation such as payments reported as late that were not late can affect your credit score negatively, eventually costing you money in higher interest rates. Check to make sure there are not any duplicate accounts or accounts you don’t recognize. Dispute any errors you find right away, and if you need help with this process, reach out to Dovly.
Dovly is an AI credit engine that can help you track and fix your credit. Try it risk-free with our free membership tier. Contact Dovly today.
