In today’s busy world, where everything is available online- be it shopping, booking a movie, looking for property etc. The payment is easily made with just swiping your credit card. But there’s something which most of us neglect, to know your credit score.
So, what’s the big deal and how do things change by knowing the credit score?
This is what you might be thinking. However, knowing your credit score can benefit you in various ways. Swiping your card is the easiest thing to do. But every time you swipe your card, your credit score changes. Every change in your credit score can significantly change your decisions. Before you know the benefits of a good credit score, you must know what credit score is and how is it calculated.
What is a credit score and how is it calculated?
A credit score is a statistical number that defines your creditworthiness. A credit score is the distilled version of your credit report. It is a 3 digit number which is calculated using complex formulas. The credit score ranges between 300 to 850. A high score represents that the person is financially trustworthy.
The factors involved in calculating the credit score are:
- Your payment history
- The length of your credit history
- The number of accounts you have
- The types of accounts you have
- Your used credit vs your available credit
In short, your credit score not only shows how well you manage your debts but opens up to a wide range of benefits.
So, let’s understand why it is important to know your credit score.
4 Reasons to know your credit score:
1. Your credit score gives a clear report of personal financial health
Do you know your credit score?
You can get a clear report of your overall personal financial health just by analyzing your credit score. If your credit score is:
- Low credit score implies: That you have more debts which you can’t comfortable handle. Also, it implies having too many credit cards at once.
- High credit score implies: You have handled your debts well and you clear debts on time.
Every change in your credit score gives you the idea of your changing financial situation. So, it’s essential to do credit monitoring once every month to keep a check on your personal financial health.
Check your credit score now to see know the status of your personal financial health. You can know your credit score online through multiple sources.
2. Your credit score helps you to protect yourself from frauds
You can check your financial situation by analyzing your credit history and credit report. Your credit score can show if you’re financially vulnerable from the way you handle your finances. Every late payment you make or having lots of credit, all this will be visible in your low credit score. If you’re among the people who never miss out any bill, do on-time payment, have zero debt and a small handful of credit cards then, your credit score will automatically be high. Additionally, the credit score helps you to protect yourself from frauds.
How will you know if your credit card is being misused by someone else?
In this tech-savvy era, anyone can easily misuse your credit card just by knowing your credit card number and other particulars. Credit card frauds both online and offline have become a common threat these days. So, it’s very important to be cautious when it comes to managing your credit card.
Fraudsters can buy new credit cards on your name if they know your SSN. Because of such events, your credit score can take a slide down. So, it is very essential to know your credit score and monitor every small change that happens. If you feel there’s some change in your credit score which you feel suspicious then check with your credit card provider immediately.
3. Your credit score will fetch you a discount for life
Having a good credit score can easily get money from credits or bank at good interest rates. Not only that you can enjoy benefits such as a loan with low-interest rates, get approved for a mortgage loan, extra competitive for a new job or rental property etc.
4. Your credit score shows how you can mold your finances to a better shape
Your credit score can point out mistakes and act like a coach by showing the way for better financial management. Act according to the way your credit score recommends to mold your financial future to a better shape.
Hope you would have understood the importance of knowing your credit score. Start evaluating how you can avail the benefits of your credit score. Also, if you feel your credit score is low then look for ways to improve it.