It’s crucial to have a good credit score, and having a good one is more important now than ever before. A lot of people don’t know where to start when they are on their own, especially people who are newly adults. To understand more about credit score and how to raise one, we need to cover a few of the basics first:
*A credit score is your track record for your financial responsibility. It shows how reliable you are at making payments, making payments on time, paying off credit, how long your credit has been accumulating, etc.
*A credit score will range between 300 and 850. You want a high credit score.
*It’s important to have a good credit score so you can do what you need to do, such as financing a house or getting a new car.
*There isn’t just one credit-scoring model, but the one you should look into in checking your credit score is the FICO model. Under this model, there are three credit scores for you to check out reports on—one from each of the credit bureaus.Now that we’ve covered the basics, let’s get into how to obtain a good credit score:
*As mentioned in the list above, to have a good credit score, you first need to be good at making payments. There is so much that goes into having a good credit score, so keep that in mind as well.
*It isn’t just about making payments, either, as your credit score is also affected by your history’s length. The longer you’ve had your credit, the lower your credit score will likely be.
*Different kinds of credit all affect your credit score, including newer credit cards and how long you’ve had an old one (and how you’ve kept on top of it).
*Something simple that a lot of people look over doing is checking out their credit report. Look from time to time to make sure that everything is correct and that there are no mistakes, such as incorrect late payments or anything like that.
*Staying on top of payments and ensuring you aren’t late is important for more than just avoiding an unnecessary fee. To have a high credit score, you need to take measures to make payments on time. A good way to do this is to set up automatic payments or to send yourself digital reminders.
*It may seem counterproductive, but try to use your credit card as little as possible. When you do use it, be sure to pay off the charges right away. You do need to use your credit card from time to time to build up credit, but in order to have a high credit score, you should try to only use your credit card when you know you have the money at home or in another bank account. That way, you can pay with money you know you have and can instantly pay off the charges you made while you were out (or online).
*As you pay off credit cards and different lines of credit, it’s important to remember that just because you paid something off doesn’t mean you will see the effects right away. It takes time for your credit score to erase the built-up credit. It may stay on there for up to seven years.
*Don’t let having a credit card or credit line scare you. As long as you keep good habits and do what is right for you, you should be okay. For instance, having a credit card/line is important to build up a credit score, so closing an account could be harmful in the long-run. However, it also isn’t good to open multiple credit lines, either. Not only could this bring added temptation to spend more money that you don’t yet have, but it could also affect your score by even being opened. Your credit score takes into account what credit lines you have open, how many, how long they’ve been open, etc.
*On that note, new accounts can negatively affect your credit score, so be cautious to open new accounts. If you have questions about what to do, seek the aid of a financial professional and make a plan that’s right for you.
*If you are behind on payments or have debt built up, pay off these debts as soon as you can and try to always stay current.
*If you have a bad credit score or a below average one, and you want to know how to affect it positively, in the long run, focus on paying off your old accounts and starting new credit lines. This could be beneficial in the long run but not the short run.
*As you keep the above points in mind, remember that it also depends on your individual situation. So, make sure you look into these tips and see what you need to do to personally higher your credit score.
It can seem overwhelming when you don’t know where to start or where to go to have a good or better credit score, so sometimes it’s best to take a step back and look at the basics and read about tips on where to start. The list above can help you on your journey to financial success, so be sure to look into which ones will help you the most and start building a fantastic credit score and know how to keep it.