Credit Scores: 10 Important Things You Need to Know

May 7th, 2015 by

Your credit score can influence many things in your life, from how much you pay on your mortgage to whether you can get approved to buy the new car you want. If you don’t have a high credit score, bad credit auto loans can help you buy a new car, taking care of at least one major need.

Getting your credit in good shape is the best thing you can do to open up the best financial opportunities and save yourself thousands in interest. Having a good understanding of the credit score can help you make smart financial choices. Here are 10 important things you need to know about credit score:

1. Your Credit Score Affects More than Loans

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You may think of your credit score primarily when you are applying for a loan, but it actually affects much more than that. Your credit score can affect your ability to get a job, especially if it involves financial responsibility. Your score can even affect your ability to hold certain positions of responsibility, such as serving as a foster parent or taking a volunteer leadership role.

Some could see a poor credit score as proof of your financial need or of your irresponsible behavior. Even if these things aren’t true, the score could be interpreted as such.

2. Many Factors Influence Your Credit Score

The exact formula for determining credit score is kept hidden, but we do know what factors influence the process. These factors include your payment history, the amount of revolving credit you have, how much debt you have compared to your available credit, the age of your accounts, and the number of inquiries on your credit report.

The score also takes into account the mixture of accounts you have, including secured loans like a mortgage and unsecured accounts like credit cards.

3. Inaccurate Information Can Affect Your Score

Any information on your credit report can influence your credit score. If you never correct negative information, it will bring down your score.

That’s why it’s important to check your credit report regularly. If you find any inaccurate information, you need to send a written request to the credit bureau to have it corrected.

4. Too Many Inquiries Will Hurt Your Score

Every time you apply for credit, whether it be a credit card or a car loan, an inquiry shows up on your report. If you have too many inquiries, it looks like you are struggling financially and trying to take out a lot of credit to get by. Your credit score will suffer as a result.

5. You Won’t Hurt Your Score by Checking It

When you check your own credit report or credit score, it doesn’t show up as an inquiry. Therefore, checking your own credit won’t hurt your score. You should check your credit report and score at least once a year. However, if you are actively trying to improve your score or you need to monitor for fraud, you should check it more often.

6. You Can Get Your Report and Score for Free

You are legally allowed to request a copy of your credit report from each of the three major credit bureaus once a year. However, these reports do not include your score. Typically, you have to pay a fee to get your score.

Some places, such as Credit.com, offer your score for free.

7. You Have More than One Credit Score

The credit score most often used is the Fair Isaac FICO score. The score ranges between 300 and 850 points. Those at the higher end of the scale get approved for the most loans and for the lowest interest rates. Those at the lower end of the scale struggle to get financing at all, and if they do, they usually have to pay large interest rates. Fortunately, bad credit auto loans offer affordable financing even for those with scores at the lower end of the spectrum.

The FICO score is not the only credit score. VantageScore is another score that is used, and it ranges from 501 to 990.

8. There are No Joint Scores

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You may have plenty of accounts with your spouse, but you don’t have a joint credit score. Those accounts will, however, show up on your credit report and your spouse’s credit report. Joint accounts will be evaluated with the rest of your individual credit history and will influence your score positively or negatively.

One joint account can influence your score and your spouse’s score separately. For example, if it’s a credit account that is paid on time but that is nearing its limit, it could negatively affect your account if you have a stellar credit history, but it could positively affect your spouse’s score if the credit history is full of delinquencies.

9. Negatives Won’t Affect Your Credit Score Forever

While delinquencies, bankruptcies, foreclosures and other issues like these will negatively effect your credit score, they won’t haunt you forever. Most negative marks on your credit history will fall off after seven to 10 years. They shouldn’t appear on your credit report after that, and they shouldn’t negatively influence your credit score.

10. Medical Debt Doesn’t Influence Your Score

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Medical debt doesn’t influence your credit score because it doesn’t appear on your credit report. The only way that medical debt will ever show up on your report or affect your score is if you don’t pay it and it is turned over to a collection agency. At that point, it is considered a delinquency, and it will negatively impact your score.

Fortunately, most medical providers are quite willing to work out a payment plan to help you avoid defaulting on the debt.

Knowing what goes into your credit score can help you make better financial decisions so that you can get the best rates on your credit cards and loans. However, if your credit score is already low, it can take some time to improve it. Applying for bad credit car loans is one way to get the car you need while also improving your credit. You can start building a positive payment history while paying off the loan, slowly improving your credit score. Meanwhile, you’ll have your choice of quality vehicles.

McCluskey Automotive sells a wide variety of quality, previously owned vehicles at affordable prices, and we offer bad credit auto loans with reasonable rates for those who are struggling to find financing. Visit us today to learn more about our selection and our financing offers.