Credit Scores and You
Hello everyone, This month’s theme at Dream on Youth is financial education; I would like to discuss an essential aspect of financial health your Credit Score.
What Is A Credit Score?
Credit Scores are essentially snapshots of your financial history that lenders use to determine whether borrowers are reliable enough to borrow. In the US, three major companies issue these Scores TransUnion, Experian, and Equifax. It is possible to have different Credit Scores across the three agencies, so make sure to check all three before your next loan application. Lenders can have other relationships with each of these companies; for example, if you apply for a credit card, the Lender may only ask TransUnion for your score with them rather than with all three scores.
What are the Scores?
Credit scores range from 580 or lower which is considered very poor credit to above 800 which is considered perfect. Most people fall in the good credit range of between 670 to 739 and the majority of lenders look for a score in this range. It is not necessary to have a perfect credit score by any means.
What Makes up your Credit Score?
Your credit score is affected by the following factors:
35% of the Score is your ability to pay bills on time.
30% of your Credit Score is based on the amount you owe.
15% of your Credit Score is based on how long you have had the accounts open.
10% is the Credit mix how many differnt types of accounts you owe money on.
10% is the amount of new credit you have available to you.
Bills that most frequently effect your credit score are payments on Student Loans, Car Notes, Mortgages, Credit Card balances, and loans of more than 500 dollars made by a Bank or other Lender.
How Do I Raise a Low Credit Score?
Raising a Low Credit Score can be difficult, but it is not impossible. One simple way to begin is by applying for a Secured Card. A Secured Credit Card, unlike a traditional Credit Card, requires a cash deposit typically between 200 to 3,000 Dollars. If you have debts that are in collections or delinquent, take the steps necessary to remove or rehabilitate the debt as soon as possible. Your lender should have resources you need to help get your debt under control. You can also become an authorized user on the Credit Cards used by a family member with good credit.
Avoid Credit Repair Companies or other companies that promise to help erase or fix your debt for a fee. They aren’t able to do anything that you as an account holder can’t do yourself for free.
I hope this helped answer a few questions you may have had about your Credit Score. For additional reading please follow the links below.
https://www.investopedia.com/how-to-improve-your-credit-score-4590097
https://www.myfico.com/credit-education/credit-scores
https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/