Hello savvy savers! We’re talking credit scores again. Why? Because it is a major factor in what you can get out of life. It impacts your approval for loans, leases and so much more.
I hope by now that you all have received and reviewed one or all of your free credit reports. If not, I encourage you to do so. You can find info on my recent blog post here blog post, here
Now, I’d like to share information about "Knowing Your Credit Scores".
What Is Your Credit Score?
Basically, your credit score is a three-digit number that represents how you have paid back money you have borrowed or how you used credit that have been extended to you. It summarizes your full report into three digits using a percentage scale.
You can obtain your credit scores from TransUnion, Equifax, and Experian. It is important to get your scores from each of these national credit bureau as more often than not the score may vary because the information in each is different.
Below is a breakdown of how each credit score organization works and how it can effect you:
The FICO Credit Score:
• Calculated by Fair Isaac Corporation
• Used by most top lenders
• Ranges from 300 - 850.
• The lowest number represents a low or bad score and the highest number is a high or good score.
• A good credit score is 720
It is important to note, there are other types of credit scores, such as Vantage (2.0 and 3.) and Plus, and they use a number range and/or a letter grade as the measurement.
Below are the factors that affect your score:
1. Payment history - 35%
This has the largest impact to your score; The secret to this one is simple - pay your bills on time. A few options that may help you pay bills on time are. It effects you negatively when making payments late.
2. Amount of debt or amount owed: 30%
This is the next largest impact to your score. Try not to have more credit card debt then you can afford. Work each month to pay the balance(s) in full. A good rule of thumb is to not owe more than 30% of your credit limit. If you have a credit card with a $500 credit limit, try not to carry more than $150 if any balance if any at all.
Negatives: Maxing out your credit cards effects your score negatively. “Max out” means your credit limit is $500 and your balance (amount you owe) is $500, the entire amount of the credit line.
3. Length of Credit History - 15% - How long you have had each line of credit is taken into consideration.
4. New Credit - 10%
Opening up too many accounts around the same time is not a great thing. Try to refrain from opening cards just because you get a % off the purchase the day.
5. Types of Credit or Credit Mix - 10%
It is good to have different types of credit, such as credit cards, mortgage, and car loan. It is not required but if you have a good mix and paying them all time then that is favorable to your credit score. There is typically a small charge to get your credit score from the national credit bureaus.
Here are a few apps where you can get your credit scores for free. When access your credit score from these apps be sure to know which the of score method they use.
1. Credit Karma: https://www.creditkarma.com where you can easily download on your smart phone and check you credit score for free.
2.Creditwise by Capital one: https://www.capitalone.com/credit-cards/benefits/creditwise/
3. Credit Sesame: https://creditsesame.com
Stay tuned for our next blog post, which will demonstrate how credit score can effect you in different scenarios! Be sure to follow us on Instagram, @itsmymoney_ .
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