How do you know if you have a good credit score?
Q. If financing for a car, boat or home is based largely on my credit score, how do I know if my credit score is good, average, or poor? How do I know if I’m getting the best financing available to me?
A. Since lenders base their financing offers on your credit score, consumers who buy the same new car with all the same features, at the same price, will not necessarily get the same offer from their bank or credit union. The offer, and ultimately the amount you will pay for the car, including interest, is based on your credit score.
You need to know that there are a number of credit scores, and all lenders do not have the same cut-off for what determines if a score is excellent, very good, good, fair or poor. In addition, different products, such as cars, homes, and boats, may have different score requirements. This means you may need a higher credit score to qualify for the best interest rate for a mortgage, compared to what you would need to qualify for a car.
If you have a lender or credit card company that offers you your credit score for free, then check out your score with them. The lender will often provide you with additional information about your score. For example, when they provide your score, they provide an explanation of your score and whether it is considered anywhere from excellent to poor.
If you cannot get your credit score for free from a prospective lender, you may opt to pay for your score. You can do this by going to any credit reporting agency. You can expect to pay about $16 for your credit score.
Some credit reporting agencies are offering a special with your credit report and score for $1 along with a 7 day trial of a credit monitoring service. Monitoring services can range from $20 to $40 a month.
If you do pay for your score, I’d discourage you from enrolling in a credit monitoring service and paying a monthly fee. Rather, I suggest you pay one time for your credit score or make sure you cancel any trial membership. As part of your score, you should receive a detailed explanation that tells you where you fall among all other credit scores, or in other words, how good your score is.
If you are planning to purchase a car, and apply for a loan, your bank or credit union will pull your score. Ask them to explain your score to you. Is your score, according to them, excellent, very good, good, fair or poor?
One young couple I know was interested in purchasing a new truck. I advised them to go to their local lender first to see how much they could borrow and at what interest rate.They also got their credit score in the process. When they went to the dealership and found the truck they wanted, the dealership offered them an interest rate that was 4% higher than their local lender. Because the couple knew they weren’t getting the best rate at the dealership, they opted to work with their bank instead.
They were thrilled to get the truck they wanted without having to pay more than necessary. As this example illustrates, it pays to know your credit score so that you can ensure you’re getting the best deal possible. If it’s been more than a year or two since you’ve gotten your score, I’d encourage you to take the time and effort to get it.
Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email firstname.lastname@example.org.
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