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Posted by Team CentSai (MONEY FORUMS: 9, Answers: 0)
Asked on September 15, 2015 8:43 am
Your credit score is very important, but does not have to be perfect. There are actually a number of scores for each person, with different scoring models producing slightly different numbers. But it is fine for discussion purposes to just refer to this set of scores as your "score". Some people advocate not using debt and having no score. This is fine for some people, however not having credit limits your ability to take advantage of opportunities and can not only make life somewhat harder it can actually cost you financially. The higher you score the less you pay to borrow money. This is pretty much across the board, lower credit card interest, lower auto loan interest, and lower mortgage rates. A small increase in rate can mean you end up paying a lot more money. Average credit scores in the US hover around 680. It is good to be above this, but not an absolute necessity. The first hurdle it is important to achieve is above 625. This is generally the threshold for traditional auto finance. Persons with scores under 625 generally have to get special auto financing at significantly higher rates. The nest hurdle is to get above 725. This number is key to getting into most programs which require good credit. Scores over 725 are better, but by the time you get to 725 you get pretty good rates so there is a diminishing return on having a higher score. Your credit score also is dynamic, it reflects where you are presently and your history generally going back seven years, ten years for judgments, bankruptcies, and a couple of other severe credit issues. The further back a negative event is the less impact it has on your current score. If you pay everything on time and keep paying on time you will build a positive credit history which will produce a good credit score.