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.

You'll need to provide credit score information if you want to buy a house. According to www.MyFICO.com, 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.

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.

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.

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