About 41 percent of people don’t know that their credit scores may limit their mobile phone service options. Believe it or not, your credit can limit much more than your loan approval chances. It can stop you from achieving your financial freedom.
Getting your finances on the right track may seem next to impossible. Yet, you can take control of your situation and achieve your financial goals. Don’t know where to start?
We’ve got you covered. We’ll answer the most common credit questions that may be stopping you from beginning your journey toward financial freedom. Read on for your personal credit guide to break your cycle today.
Improving Your Finances: Top Credit Questions to Know Where You Stand
You may want to achieve financial goals such as paying off your student loans or settling your credit card debt before a certain age. While it may seem difficult, you can make this happen.
It all starts with educating yourself. You might be afraid about discussing or asking questions about credit. Yet, you should at least learn the basics to start your journey toward financial freedom.
Here are the answers to 9 questions about credit that can help you get your finances in order today.
- 1 1. What Is a Credit Score?
- 2 2. Can You Check Your Credit Score?
- 3 3. Will Credit Inquiries Hurt Your Credit?
- 4 4. Does a Good Credit Score Guarantee Credit Approval?
- 5 5. Is Getting a Credit Card the Only Way to Build Credit?
- 6 6. What Factors Influence Your Credit Score?
- 7 7. Do Credit Scores Impact Interest Rates on Your Accounts?
- 8 8. Can Joint Accounts Hurt Your Credit?
- 9 9. Is Building Your Credit Important?
1. What Is a Credit Score?
A credit score is a three-digit number that predicts your on-time repayment capacity. Companies report your payment history, available credit, balances, and other relevant information to the credit bureaus.
Experian, TransUnion, and Equifax are the three major credit bureaus used by most lenders. Each company calculates your credit score based on the reported information. Credit scores range from 300 to 850 points.
2. Can You Check Your Credit Score?
Yes, you can check your credit scores. You may think monitoring your credit may hurt your score. Yet, that isn’t true.
Federal law allows you to request a copy of your dispute items on credit report free of charge every year. You can request your report from the three major credit bureaus. It’s recommended that you split these requests throughout the year to monitor your credit.
3. Will Credit Inquiries Hurt Your Credit?
You may think applying at several lenders at the same time is the best call to obtain the funding you need. Yet, credit inquiries can hurt your credit.
Your credit pulls determine 10 percent of your credit score. It’s recommended to keep your inquiries as low as possible.
4. Does a Good Credit Score Guarantee Credit Approval?
Having good credit doesn’t guarantee your lender will approve your application. But, it does increase your chances of approval. Each lender has their own approval guidelines and applicant requirements.
Most of them prioritize your income and repayment capacity. If your score is less than perfect, you may consider checking out this helpful page to learn how no credit check loans work.
Keep in mind that even though these lenders may not consider your credit score, you must provide proof of income. You may consider requesting a lower loan amount to improve your chances of approval.
5. Is Getting a Credit Card the Only Way to Build Credit?
While owning a credit card and keeping it current is one of the most popular credit building tactics. You may consider taking a credit builder loan to improve your credit and avoid spending temptation.
For these loans, your lender will approve a certain amount based on your credit and financial information. Once approved, they will hold your funds in a certificate of deposit or savings account.
During your repayment term, you will pay your loan principal, interest and financing charges. Also, the financial institution will report your loan information and payment history to help you build your credit.
The lender will give you the money plus any earned interest income after you complete your repayment. Keep in mind that you won’t have access to the funds until you repay the loan. But, you will improve your money saving habits and payment history.
6. What Factors Influence Your Credit Score?
Believe it or not, your credit score isn’t only determined by your credit utilization ratio. This number is the ratio between your available credit and current debt. In addition to this factor, your payment history, inquiries, types of credit accounts and credit history length determine your score.
The most important factor is your payment history that determines 35 percent of your score. Credit bureaus use your credit utilization ratio to calculate 30 percent of credit scores.
In contrast, the length of your credit history is only 15 percent of your score. The least important factors are the types of credit accounts and inquiries. These factors only weight 10 percent of your credit scores.
7. Do Credit Scores Impact Interest Rates on Your Accounts?
Credit scores don’t affect the interest rates on your current accounts. Yet, these scores will determine your eligibility for low-interest rates on your new accounts. If you improve your credit, you may consider contacting your lender.
You can ask to negotiate your current interest rate. Keep in mind that your lender may pull your credit. While the inquiry will lower your credit score, a lower rate can help you pay off your debt faster.
8. Can Joint Accounts Hurt Your Credit?
Joint accounts can hurt your credit if they aren’t kept current. You may think it only applies to accounts you own with your spouse.
But, you are responsible for any account where you are a co-signer. This applies to any type of credit account from auto loans to credit cards.
9. Is Building Your Credit Important?
Believe it or not, your credit score can stop you from getting your dream job and even house. Lenders aren’t the only companies that check your credit. When you apply to rent a house or apartment, the landlord may pull your credit to learn about your payment history.
While it may lower your credit score depending on the type of credit pull, it can help you build your credit. Some landlords report your payment history. If you want to achieve your financial freedom, you must prioritize building and improving your credit.
The Bottom Line
Learning the basics about credit is the first step to achieve your financial goals. Your credit score can determine more than your loan application approval. You should consider creating your own credit building plan.
Your plan should focus on your financial goals and how you can make them happen. Consider strategies from money saving to investing to build your finances. It’s recommended to consult an expert if you want to learn more about potential strategies and financial habits to improve your finances.
So we answered all the fundamental credit questions and why you should care about it. Now you know that improving your credit can help you achieve your financial goals. Want to start fixing your credit?
Read this article for your how-to guide to repair your credit today.