If you ever wondered about your credit score, then you're not the only one. According to ZILLOW POPULATION SCIENCE, the average American knows as little as two things about credit scores. That gap is not limited to just one age group. Boomers and Gen X'ers were even less knowledgeable about credit than Gen Z'ers. Find out the most frequently asked questions about credit scores by reading on.
Common questions regarding credit scores
Your credit score can make all the difference in how you apply for loans, apartments or jobs. If you intend to achieve your financial goals you will need to know what it means. Your credit score is influenced by many factors such as your credit utilization, debt, and payment history. Your credit score tells lenders how likely your future repayments on borrowed funds will be.
How to find out your score
Lenders use your credit score to determine if you are a risky borrower. It can range from 300 up to 850. It informs lenders whether you will be capable of repaying loans. It is important to track your credit history regularly as it can affect your score.
Hard inquiry vs. Soft inquiry
There are two types in your credit report: a difficult inquiry and soft inquiry. Both have different effects on your credit score. A hard inquiry occurs when you apply in person for a loan like a student loan, a car loan, or mortgage. Depending on your credit history and credit score, a hard inquire can reduce your credit score anywhere from zero to five percentage points. It is important not to apply for credit again if you do not need to.
Hard inquiry has an impact on your credit score
Hard inquiries are made on your credit reports when you apply for a loan. Hard inquiries let potential lenders know that you are actively searching for credit. This will hurt your score because it will appear on your report, regardless of whether the application is approved or rejected. Hard inquiries indicate that you have had credit requests in the past two years.
Achieving a high credit score
Paying your bills on time is a key aspect of maintaining good credit. Your credit score will be affected if you are late with one or more of your payments. Your credit score will be affected by how timely you pay your bills. By setting up automatic payments, you can avoid the temptation to forget to pay.
Before applying for a loan, it is important to know your credit score
It's important to know your credit score before applying for a loan, because it can affect your loan application. This also gives you insight into your finances. Your credit score is used by lenders to help you determine your repayment patterns. However, your credit score is only part of the equation. Lenders can also consider your income which can impact your score. You can avoid being taken advantage by red flags by regularly reviewing your credit score.