Being approved for a loan is dependent on a lot of things, your credit score being one of the most important factors. Your credit score is a three-digit number that reflects your overall credit history. It can tell a lender the level of risk associated with lending you money based on several key factors. If you're new to the United States, you won't have a credit score -- you're a blank slate. This might seem good, but in reality, having a credit score is important to get funding for school, cars and more.
How is Your Credit Score Calculated?
Your credit score is calculated using an algorithm that aims to reflect your credit history. Credit scores take into account five main factors. They include the following:
- The type of credit you are using. Accounts like credit cards may lower your score more than a student loan or mortgage, which are seen as "positive" debt.
- Your history of paying on time. Making on-time payments will help build a good credit score.
- The length of your credit history. Over time, the length of your open accounts in good standing will improve your score.
- The number of new accounts. If you apply for a ton of new financing opportunities at once, your credit score could go down.
- The amount of money you owe. Keeping your total balance owed under 50 percent of your total credit available will help your score.
Why Does Your Credit Score Matter?
Your credit score affects your ability to get a student loan, car loan, and other personal financing. Landlords also run your credit score, so building good credit could help you get a great apartment. Insurance companies may also run your credit score when they are calculating your premium. You will save money in the long run with a good credit score because you will be approved for lower interest rates.
Want to start building your credit score today? Apply for a loan with Boro, which specializes in funding for college students who don't have a SSN or credit history. Use your Boro car loan to establish good credit now, and you will benefit later!