If you've ever wondered about your credit score, you're not alone. ZILLOW POULATION SCIENCE says that the average American doesn't know much about credit scores. That gap is not limited to just one age group. Boomers, Gen X'ers, and Gen Z'ers were less educated about credit than Generation Z'ers. Find out the most frequently asked questions about credit scores by reading on.
Commonly asked questions on credit scores
Your credit score could make a huge difference in your ability to apply for loans or apartments. If you want to reach your financial goals, it's essential to understand what credit score means. Your credit score is influenced by many factors such as your credit utilization, debt, and payment history. Your score will tell lenders how likely it is that you will make future payments on borrowed money.
How to calculate your score
Credit scores are the number lenders use to assess your credit risk to decide whether or not you're worthy of their lending. It ranges from 300 to 850 and tells lenders whether you'll be able to repay loans. Credit history has a significant impact on your score so it is important to keep track.
Hard inquiry vs. easy inquiry
There are two kinds of inquiries on your credit reports: a hard inquiry, and asofter inquiry. Both have different effects on your credit score. When you apply for a loan such as a car loan or student loan, a hard inquiry is made. Depending on your credit history, a hard inquiry may lower your credit score by 0-5 points. This means it's important to stop applying for credit if you don’t need to.
Impact of hard inquiry on credit score
When you apply for a loan, you trigger a hard inquiry on your credit report. Hard inquiries tell potential lenders that your are looking for credit. It will harm your score as it will appear in your report, irrespective of whether the application is approved. Hard inquiries show that you have made credit applications within the last two years.
Credit score improvement
One of the most important aspects of maintaining a good credit score is paying your bills on time. Late payments can negatively impact your credit score. Paying your dues is what will determine more than 30% of your credit score. Set up automatic payments to avoid falling for the trap of forgetting to make your payments.
Know your score before you apply for a loan
Before applying for a loan you should know your credit score. This can impact your application. It can also give insight into how your finances are managed. To determine your repayment behavior, most lenders will look at your credit score. Your credit score is just one piece of the equation. Lenders also take into account your income, which can affect your score. It is possible to spot red flags in your credit score and avoid being taken advantage.