Why is My Credit Score So Important?

Why is my credit score so important and what does that mean to me? Well it could mean the difference between whether you can get a job, rent an apartment, buy a car or buy a house. If your credit score is poor, it can also mean you'll pay higher interest on everything. It's basically a number that says how effectively you deal with your finances and your life.

First you should know how your FICO score is computed. Your FICO score is comprised of 5 different areas. Your payment history accounts for 35%, amounts currently owed on all your bills accounts for 30%, and the rest is divided up by length of credit history, new types and used.

On the other hand, some things are not included in your credit score Things such as your race, your salary, where you live and your age. So don't feel singled out about these issues as none of them are taken into consideration.

Credit bureaus use a range of 300 to 850 to classify your score so the obvious applies. A score of 300 means it is literally impossible for you to obtain credit If you have a score of 700 to 850 you're considered a good risk so when you obtain credit it will come with a lower interest rate. The average American is thought to be somewhere in the middle.

How can you change your poor score? First you should get rid of your credit cards. Call the customer service number on the back of the card and tell the agent you want this card "closed by consumer." Also request that they send you a letter documenting your conversation. Each time you do this your score will improve. Too many credit cards equal a poor score. Always make your payments on time. As we progress through this country's financial crisis, making a late payment on anything could increase your interest rate to 29.9%. That means your payments will sky rocket. The rules have stiffened so you must take paying your bills on time seriously.

If, for some reason you find your identity has been stolen, report it to all 3 credit bureaus without delay as this will definitely affect your credit score Ask them to flag your account so you won't be responsible for some thief who is recklessly spending all your money. Also, report it to the police immediately and get a police report. That will be important down the line.

Your score good or bad will have an effect on your life. It's important that you know what your credit score means and why you're score is so important. So take it upon yourself to find out exactly what your score is and move forward from there. Take the time to work on improving your score and your life will be that much easier. You also won't have to deal with rejection.