When You'll Report Credit Score Information

"Three-hundred or eight-hundred, what's the difference?" Many students who are just learning about credit scores meaning don't really understand what goes into a credit report or why it matters. Yet many people are genuinely shocked when they find they are turned down for their first car loan because they have poor credit scores, or when they can't find their first apartment to rent because they don't have sufficient credit history. There are many reasons why you'll need to report credit score information and even more reasons why good credit scores matter.

There are many instances in life where you'll need to report credit score information. You should look at your credit score report as a bartering tool. The economy can work for you and there are temporary pockets of "free money" out there, if you are deemed responsible and trustworthy. Your word means nothing to an investor who doesn't know you. All they know about you is whether you have poor or good credit scores. A number from 300 - 850 will indicate how much you can borrow, how long you can borrow for, how much you're charged on what you borrow and, in some cases, whether you're allowed to borrow at all!

To report credit score information, you often don't have to do anything. The lender will use your personal information to look up your credit score report through the data base. On your report, you'll be able to see everyone who looks up your information in the "Inquiries" section. This information is merely used to indicate your borrowing and repayment patterns to let lenders know how big a liability you are and subsequently, what interest rates to charge you or whether they should grant a loan to you at all. You represent an investment to these lenders and what investor wouldn't want to make a sound decision?

In an ideal world, everyone would have lump sums of cashing floating around and have the ability to just drop $100,000 down on a house or $25,000 down on a new car. We can't all be rich, but the United States allows us to live like we are through a system of credit. This is often referred to as "purchase power" and to have a lot of purchase power, you will need to report credit score information prior to borrowing and be found to have good credit scores. This credit scores range, between 300 and 850, will determine whether you can borrow, how much you can borrow, how often you can borrow and ultimately says something about the person, personally. There are many reasons to work towards clear credit and not get caught up in the hype of "free money."

You'll need to provide credit score information if you want to buy a house. According to MyFICO, if you're in the top credit score bracket of 760-850, then you can get a 30 year fixed-rate mortgage at an interest rate of 6.149%, so you'd pay roughly $609/month on a $100,000 house. However, if you're in one of the lower credit score brackets (500 - 579), then your interest rate will be 10.310%, making your monthly payments $901 on that same house, which means by the end of your loan period, you will have paid $105,120 more than the person with good credit! A low rating credit score in the range of 300-500 means you won't get a home loan at all! In fact, in lieu of the mortgage meltdown, most financial institutions have raised the bar considerably, so you can't get a mortgage if your credit score is below 650! For many heartbroken ex-homeowners, this means they'll need to downsize their family into an apartment and wait for at least three years before their credit scores can rebound.

You will also report credit score information when you're opening a bank account. This may sound silly, but if you abuse your credit purchasing power, then you won't be able to open a bank account! If you have a history of overdrafts on your account, or bounced check fees and not paying monthly bills on-time, then no one will even offer you a place to rest your money. If you think you can just leave one bank and walk into another, guess again! With their industry ChexSystems database, other banks will see your banking history, as well as your credit score report and will deny you all the same. Soon, you'll find yourself searching for a MoneyMart or payday loans center to take care of your banking needs. That's no way to live!

People also report credit score information to secure student loans. If you have a score of 770 or higher, then you can get an interest rate as low as 2.3%. However, if your score range is 690-739, then your rate will drop to 3.95%. If it is in the range of 660-669, it will fetch you a 6.45% interest loan! As you can see, the rates increase significantly every 100 points. Who wants to pay three times more than they have to for their education? Sometimes students can get their parents to co-sign the loans with them to boost their credit rating. Lenders may also give better rates to students who agree to begin paying back the loan while they're still in school. To see your credit score, you are entitled to a free copy through www.AnnualCreditReport.com from one of the three major providers: TransUnion, Equifax or Experian.

You'll also report credit score information to get an auto loan. According to www.MyFICO.com, if you buy a $25,000 car on a 36-month loan, then your monthly payments can be as low as $762 at 6.157% interest. However, borrowers with bad credit scores (500-589) can pay as much as $871/month with a 15.316% interest rate offering! So by the end of the borrowing period, the person with bad credit will have paid $3,924 more for that same car as the person with good credit. Most people are trying for lower payments that span 5 years and result in monthly payments of less than $200, but people with poor credit scores aren't even eligible for this deal. Some borrowers will need to find someone to co-sign for them or put more money down just to get any break.

To secure the best interest rates for new credit cards, the industry will report credit score information to these companies offering you money. If you've ever missed one payment, then you'll notice how quickly your interest rate can go sour. You may start with an interest rate of 8% but see it skyrocket to 20% once you miss a payment and many of the 0% interest cards function this way. So if you have a balance of $1,000, then you will go from paying $8 in interest to paying $20. You can see how easily that can escalate, especially if you have more than one credit card. Yes, they can all go up together if you owe more than a grand. All the subsequent offers you receive will show that new high interest rate, which could jeopardize your entire financial future. Ensuring good credit history and good credit scores can help open doors for you.

When you are looking to rent an apartment, the landlord will often ask for you to report credit score information too. This is a huge blow for many new college students who assumed they could just walk into a new place based on good faith, job references and a bank account. A landlord will examine your credit report to see how many previous residences you have had, what your job history looks like and if you have a history of paying monthly bills. Obviously, as an investor, a landlord would not want an unknown, untested tenant with no track record of reliability. Going from living with your parents to having to remember deadlines, live on a budget, exercise discipline and pay lump sum payments each month can be a big transition. If you have nothing on your report, then the landlord may refuse to rent to you, request that you prove you have 40x the annual rent in your bank account, or ask that you find someone to co-sign for you. It's recommended, then, that you improve credit scores by having a credit card that you just use for gas or other small payments, like paying your monthly phone bill. You can set up your account to do direct deposits each month to ensure that there is never a missed or late payment and soon your credit history will be looking good.

If you're feeling ashamed and embarrassed when it's time to report credit score information, then you'll be happy to know there are some ways to improve credit scores. Be aware that time and responsible behavior will heal these financial wounds but it's not going to happen overnight. First, you should know that the last year of borrowing history factors 35% into your credit score number. The last 13-24 months factors another 30% into your rating, so the last two years are definitely the most critical. If you messed up in the past, that information will still be on your report for seven years, or ten years for a bankruptcy, but it won't weigh as heavily on your overall score. Paying your electric, utility, credit cards, cell phone, rent or mortgage and loans bills on time is the best way to get ahead. At least make the minimum payments, but be aware that it could take 10-30 years to pay off your bills that way, so get into the habit of never borrowing more than you can realistically repay within the month. If you have debts, then pay off your high interest debts first. To rebuild positive credit again, consider opting for a secured credit card, which links to a pre-paid account and shows that you can pay off debt responsibly.