Three Little Numbers That Can Change Your Life

Your credit score—that three-digit number that represents your creditworthiness—plays a surprisingly major role in the direction your life may take, perhaps in ways you haven’t considered before. Many people know that a high score may improve their chances of getting a loan, and maybe an attractive interest rate to go with it. However, besides lenders, many other businesses are looking at your credit score—some of which may surprise you.

Your Insurance Company

Both auto and home insurance providers calculate your premiums using a number of factors, and your credit score is an important piece of the puzzle. Those with higher credit scores typically have lower insurance premiums than those with poor creditworthiness.

Your Utility Company

If you have poor credit history, your electric company likely won’t deny you service, but it may require a large deposit when you first sign up. However, by making your payments on time each month, the company may return the deposit after a specified period of time.

Your Future Employer

These days, it’s not uncommon—and is perfectly legal—for hiring managers to check the creditworthiness of prospective employees. It’s their way of gauging reliability and responsibility among its future workforce. While they may not be looking at your score, they can pull your credit report which contains the information about your credit history that feeds into your score.

What’s a Good Credit Score?

The most commonly used FICO (Fair Isaacs Corporation) credit score ranges from 300 to 850. A FICO score of 750 to 850 is considered excellent. According to myFICO.com, those with a score in that range have access to lower interest rates and better loan terms than those with lower credit scores. Generally, a score above 700 suggests good credit management.

If your credit score happens to fall below 700, don’t panic. There are a number of things you can do to rebuild your score—or maintain the good one that you have. Although there is no “quick fix,” you can raise your credit score over time by following the steps listed below.

Six Tips to Improve Your Credit Score

1. Pay your bills on time or set up automatic payments to make sure your bills are paid on time. On-time payments make up the single biggest component of your credit score.
2. Pay down your debts. If you can’t make your payments, let the creditor know you are having difficulty. They may offer you another repayment option.
3. Avoid carrying credit card debt into the next month.
4. Avoid maxing out a credit card.
5. Don’t apply for too many loans or credit cards at the same time.
6. Check your credit reports at least annually and correct any errors immediately. Federal law allows you to get a free copy of your credit report every 12 months from each credit reporting agency. One of the easiest ways to check up on yourself is to go to www.annualcreditreport.com.

Manage Credit Responsibly

Maintaining or rebuilding a good credit score takes patience, discipline and a strong financial partner to guide you along the way. Jemma Financial is here to help you learn how to start managing credit responsibly. We understand the importance of this little three-digit number that can change the course of your life. It can be the deciding factor in whether you get a mortgage, lower insurance rates, or even your dream job.