How Does My Credit Score Affect Me?

An individuals credit score is a very important signal of your financial status. Lenders will use this credit score to determine whether or not they will offer you a loan and what your interest rate will be.

While your credit score is a key factor, lenders will also look at the information displayed in your credit reports and your loan application. By regularly checking your credit reports you can stay informed of the current information listed in your credit history. You will also be able to correct any inaccuracies. This is important to make sure that your credit data is a true reflection of your credit record.

Does my credit score affect me getting a loan?

In most cases, the answer is yes. Your score will be a factor in determining if you are eligible and then the interest rate you pay back. Your credit score is the number used by lenders to indicate how likely you are to repay your loans. Lenders have been using applicants credit scores as part of the overall lending process for more than 20 years.

Do credit scores change that much over time?

For the most part, credit scores do not change much over time. You should note that your credit score is actually calculated each time it is requested by you or a lender. When it’s calculated, information that is currently on your credit report at the time is being considered. So, as the information on your credit report changes, your credit score can also change. The extent your credit score changes over time is driven by a number of factors.

Your current credit profile – how well you have managed your credit will affect how a specific action will impact your score. For example, new data listed on your credit report, such as the opening of a new credit account, is more likely to have a larger impact for an individual who has a limited credit history in comparison to a person with a large credit history.

The change being reported – the extent of the change which is being reported will have an impact on the score. For example, a person who typically pays all of their bills on-time and continues to do so will likely see only a small impact on their score one month later. On the other hand, if that same person misses a payment or files for bankruptcy, then they will most likely see a substantial impact on their credit score the following month.

How quickly information is updated – there is sometimes a delay between the time you perform a credit action such as paying off the full balance of a credit card and when it is actually reported by the creditor to the credit bureau. It’s only when the credit bureau has processed the new information that you will see an effect on your credit score.

Keep in mind that even small changes in your credit score can be very important when you are attempting to obtain a specific credit score level or if you are trying to reach the loan requirements of a certain lender.