Your personal credit score is more than just a number. It’s a key that can unlock or limit financial opportunities. Whether you’re applying for a commercial loan, buying a home, shopping for insurance policies, or interviewing for a job, your credit score plays a crucial role in your success.

Here’s a closer look at how personal credit scores work and how you can maintain a healthy credit score and keep your financial options open.

What Is a Personal Credit Score?

A personal credit score is a three-digit number that ranges from 300 to 850. Credit bureaus such as Experian, Equifax, and TransUnion look at your financial data to determine your personal credit score. Your score takes into account your:

• Payment history on rent, loans, and bills
• Length of your credit history
• Types of credit you use (mortgage, credit card, personal loan, etc.)
• Recent credit inquiries
• The percentage of your total available credit that you’re using on your credit cards

If you pay your bills on time, have years of credit history, have multiple types of loans, and keep your credit card balances low, chances are your personal credit score is on the higher end. If you have a history of late or missed payments, a short credit history, and max out your credit cards, your score is likely on the lower end.

Lenders use your credit score to determine how much of a risk you are to lend to. They perceive someone with a higher credit score as a lower risk. You are more likely to pay your loan back on time and in full. On the other hand, they perceive someone with a lower credit score as a higher risk. They fear you will struggle to pay the loan back on time and in full.

How Your Credit Score Affects Real Estate Loans

Your personal credit score is a primary factor when you apply for a mortgage or other real estate loan. A higher credit score may qualify you for a better interest rate, lower down payment requirement, and more flexible loan terms.

Conversely, a lower credit score can lead to higher interest rates, higher down payment requirements, and even disqualification from a traditional mortgage.

How Your Credit Score Affects Your Insurance Rates

Your personal credit score can also affect your insurance premiums. Insurance companies look at a version of your credit score called a credit-based insurance score. They use this tool to determine how likely you are to file an insurance claim.

Your credit-based insurance score can impact your premium costs for auto, homeowners, and renters insurance. A higher score will help you save on insurance costs.

How Your Credit Score Affects Your Job Hunt

Did you know employers may ask you to see your credit history during the interview process? They use your history to gauge your financial responsibility and look for signs of distress, such as delinquent accounts or bankruptcy. As you can imagine, a solid credit history can strengthen your candidacy, while a shakier one can weaken it.

How Your Credit Score Affects Commercial Loans

As you can imagine, your personal credit score is a major factor in a lender’s decision to work with you, your borrowing limit, and your rate. You may be surprised to learn that your personal credit score can affect your ability to secure a commercial loan for your business.

Even if you’re applying for a loan in your business’s name, lenders will look at your personal credit score to decide whether or not to lend to you. This is especially true if you are a small business owner, sole proprietor, or if your business is new. A higher personal credit score can improve your chances of being approved for a commercial loan, lower your interest rate, and increase your borrowing limit.

How to Maintain a Strong Personal Credit Score

So, what can you do to maintain a strong personal credit score, or improve your current score? Here’s what financial experts recommend:

• Pay your bills on time, as your payment history is the most important factor.
• Don’t use more than 30 percent of your available credit.
• Use a combination of credit cards, loans, and retail credit accounts.
• Don’t apply for credit too often.
• Monitor your credit report for inaccuracies and errors.

Lake Region Bank Can Expand Your Loan Options

At Lake Region Bank, our friendly, local lending team is here to help you improve your credit score so you can expand your financing opportunities. We can work with you to help you open a business account, apply for a business credit card, and give you tips on how to improve your credit score.

The Lake Region Bank commercial lending team is here to help. Get in touch with us today to get started.