Many drivers rely on financing to get behind the wheel or a new car or move into a new home. A credit score is a pertinent part of getting approval for the right loan. Thankfully, credit scores are fairly straightforward. Here’s a quick guide from us here at Pollard Used Cars.
A credit score is a number a lender uses to determine if a borrower has the capacity to repay a loan. A low score indicates a riskier borrower while a high score means there’s a better chance the loan will be repaid in full.
The majority of your credit score is determined by two main factors. Your payment history, whether you make payments on time and in full, accounts for about 35 percent of your score. Credit utilization, how you use your available credit, makes up another 30 percent. The final 35 percent is split between any new credit inquiries, the length of your credit history, and your mixture of credit accounts.
Your credit score ultimately affects your financial future. A low score will lead to more credit application rejections and higher interest rates on loan offers. A high credit score will result in the opposite, more acceptances and a lower interest rate across the board. Most FICO scores have a range of 300 to 850. The higher the score, the better your financial future looks.
Improving your credit score is fairly straightforward but takes time. Avoid opening new credit accounts and applying for loans you don’t need. Don’t open new accounts for the sake of increasing your mixture of accounts either.
As long as you use your available credit lines positively, the length of your credit history will reflect positively as well. As a result, making payments on time and living within your means will result in a higher credit score over time.