If you ever wondered about your credit score, then you're not the only one. ZILLOW POULATION SCIENCE says that the average American doesn't know much about credit scores. That gap is not limited to just one age group. Boomers and Generation X'ers knew less about credit than the Gen Z's. Find out the most frequently asked questions about credit scores by reading on.
Commonly asked questions about credit scores
Your credit score could make a huge difference in your ability to apply for loans or apartments. If you intend to achieve your financial goals you will need to know what it means. Credit scores are determined by a variety of factors including credit utilization, payment history and debt. Your score also tells lenders how likely you are to make future payments on borrowed funds.
How to find your score
Credit scores are the number lenders use to assess your credit risk to decide whether or not you're worthy of their lending. It ranges from 300 to 850 and tells lenders whether you'll be able to repay loans. Your credit history can have an impact on your score, so make sure to keep it up to date.
Comparison of hard inquiry and soft inquiry
There are two kinds of inquiries on your credit reports: a hard inquiry, and asofter inquiry. Both have different effects on your credit score. A hard inquiry happens when you apply for a loan, such as a car loan, a student loan, or a mortgage. A hard inquiry can affect your credit score from zero to five percent depending on your credit history. This means it's important to stop applying for credit if you don’t need to.
Impact of hard inquiries on your credit score
A hard inquiry is triggered on your credit report when you apply to borrow money. Hard inquiries are a sign that you are looking for credit and will be contacted by potential lenders. This will hurt your score because it will appear on your report, regardless of whether the application is approved or rejected. Hard inquiries are also a sign that you have applied to credit in the past two year.
Getting a good credit score
Paying your bills on time is a key aspect of maintaining good credit. You will have a negative impact on your credit score if you miss one or more payments. The amount of payments you make is more than 30% of credit score. Automatic payments will help you avoid falling into the trap of forgetting your payment.
Knowing your score before applying for a loan
Knowing your credit score is crucial before applying for a loan. It can also give insight into how your finances are managed. To determine your repayment behavior, most lenders will look at your credit score. However, credit scores are only one piece of the puzzle. Lenders also take into account your income, which can affect your score. By regularly checking your credit score, you can spot red flags and avoid being taken advantage of.