Understanding Your Credit Score
Credit has become so essential to most big purchases you as a consumer will have to make, and that can be scary if you do not know how credit works. Credit can be confusing, but the more you can learn and utilize your credit effectively, the better off you will be in your financial future.
A credit score above 700 is typically considered good, and if it is above 750 then that is excellent. 800 is typically the highest and 350 the lowest on most credit scales. This score is determined through 5 different factors:
- Payment History: Late payments will lower your credit score.
- Amount Owed: If you have a high credit utilization ratio, then your score will be lower.
- Length of Your Credit History: The longer you exemplify responsible financial behavior, the better your score will be. On average, most people in the excellent credit category have a credit history exceeding 7 years.
- Your Credit Mix: Having a diversified credit portfolio including multiple different types of credit should help increase your credit score.
- New Credit: The more often you apply for credit, the worse your score will be. Opening new accounts also lowers the average length of your credit history, which effects factor 3 on this list.
Other Possible Influences on Your Credit Score
Joint accounts can affect your individual credit score. So, a late payment by either party included in the joint account can hurt both people’s credit.
Student loans are also dangerous for young people who do not know how to manage their credit year. Making sure to make these payments on time can be very beneficial to a student’s financial wellbeing in the future.
Raising Your Credit Score
Bad credit can seem scary and overwhelming, but it is not irreversible. Through responsible financial behavior and potentially the help from credit repair companies, you can raise your score to a level you will be proud of. Keeping an eye on your credit and just being mindful of your financial habits can go a long way in raising your score.
Fun Facts About Your Credit
Knowing as much as you can about credit and credit scores in general can actually be very beneficial to your everyday life. Although dealing with credit may not always be the most fun activity, impressing people with all of the knowledge you have about credit might be slightly more entertaining. So, here are some “fun facts” about credit you probably did not know before!
- Around 40 percent of United States consumers have applied for new credit a minimum of one time this year. Obtaining new credit does make up 10 percent of your credit score too.