Understanding Your Credit Score
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Understanding Your Credit Score
Some essential personal loans advice is to familiarize yourself with the credit report agencies. There are three major credit reporting agencies:
• Equifax
• Experian
• TransUnion
When you apply for credit in the form of a credit cards, personal loans, mortgages, or auto loans, the lender will pull your credit report to see if you are credit-worthy. Credit scores range from a low of 300 to a high of 850. The higher your score, the better credit terms you qualify for. Loans to individuals with scores over 700 are considered to be low-risk loans, while loans to individuals with scores below 620 are considered to be high risk loans. The lower risk you are considered, the better terms you will be offered, and vice-versa.
If you're taking out a $25,000 home equity line of credit for twenty years and have a credit score of 700. You qualify for interest rates as low as 5.5%. That means you'll pay just over $16,000 interest for the loan over twenty years. If you have a credit score of 620, your rate may be as high 9.75%, and you could end up paying as much as $32000 in interest for the same $25,000 loan. It pays then, to use your credit responsibly and always pay on time.
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| Jennifer Mathes, Ph.D. |
