Your Credit Matters!
Understanding your credit is an incredibly vital thing to grasp. It’s what employers, lenders, and even insurance agencies can look at to determine if they will provide you with a service. Especially in today’s world, credit can be a huge lifesaver when needing a little extra help.
What is a credit score?
Your credit score can range from 300-850. Ratings 720 and above will usually give the borrower the best rates available unless it is a thin file (minimal trade lines and history) also known as a false Beacon. The following are the roles of credit scores:- One element of the credit decision-making process.
- Often the key to better rates. Higher scores equal a better rate.
- Not a money-management tool. This is purely an indicator of how risky you are to a lender.
- Discovering fraud or credit reporting errors is essential. You want to check your credit score periodically to ensure your personal information hasn’t been compromised.
How Scores are determined
Many different factors determine your credit score. No one knows precisely how much each category is worth, but they are all significant in determining your final number. Below are the different categories with an estimated percentage of how important each is.- Types of Credit (10%)
- New Credit (10%)
- Length of Credit History (15%)
- Amounts Owed (30%)
- Payment History (35%)
How to improve your credit score
It can take time to repair your credit score, but it’s essential to do. The following are ways that you can improve your score:- Pay on time, every time. Even if it’s just the minimum, pay it.
- Pay collection accounts.
- Keep your old accounts. Don’t cancel old credit cards that aren’t costing you money. The length of your credit is important when determining your score.
- Avoid maxing out accounts.
- Limit balance transfers.
- Avoid excess credit applications. Generally, you only need 3-5 credit cards.