Know The Answers to These Credit Questions

You probably know that your credit is one of the most important aspects of your personal finance life. Without good credit, it is practically impossible to get a home mortgage loan. And, for other loans, good credit is necessary if you want a good interest rate. A higher interest rate can cost you hundreds or thousands of dollars in higher interest charges.

It is important to be credit savvy. Over at Moolanomy, Carrie at SpendOnLife offers 10 credit questions that you should know the answers to:

1. What is the factor that most influences your credit score? Answer: Payment history.
2. Should you cancel credit accounts you no longer use? Answer: In most cases, it is a bad idea. Canceling a card reduces the amount of available credit you have, and can reduce your credit score.
3. Does your credit score suffer when you check it? Answer: No. When you check your own score it doesn’t effect your score.
4. What is considered a good credit score these days? Answer: 740
5. What is the average FICO score in the U.S.? Anwer: 678
6. Do lenders use the same score you get at MyFICO.com to judge your credit worthiness? Answer: No. Lenders actually have their own proprietary versions based on the FICO scoring model. What you look at is actually is an “educational” score that provides you an idea of what your score is.
7. Are your creditors legally required to send information to the credit bureaus? Answer: No. They actually do it on a voluntary basis.
8. If your credit card balance is $10,000, how much will you pay in interest with an APR of 20%? Answer: $11,680 if you pay only the minimum until the card is paid off. There are calculators you can use to figure out the true cost of your debt.
9. What should you look at to know whether you are a victim of ID theft? Answer: You should keep an eye on credit card statements, bank statements and your credit report in order to keep an eye out for identity theft.
10. Can your employer look at your credit report when you apply for a job? Answer: Yes. But you have to give your permission. If the employer ends up using your credit report to not hire you, you are entitled to a free copy of your credit report from the employer.

Understanding a little bit more about how credit works can help you avoid problems in the future, and can help you plan more wisely with regard to your money decisions.

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