by Naomi Stewart
A credit score is a three-digit number that can usually range from 300-850, and is designed to represent your credit risk, or in other words the likelihood of you paying your bills on time. In order to achieve a good credit score it would be wise to buy your first credit card at the age of 18. While you’re young and as you continue to get older you’ll start building up your credit score which eventually leads to buying a house, or a car. Now, credit scores can be calculated by using information in your credit reports, including your payment history, the amount of debt you may have, and lastly how long your credit history is. Higher scores indicate that you’ve demonstrated responsible credit in the past, which could lead to potential lenders and creditors to have more confidence when looking at your credit.
Now, let’s take a closer look at what a credit score means. From the chart if your credit score ranges from 350-549, you have bad credit. There are about 16% of people who potentially suffer from having a bad credit score. This typically means that if you were to decide to buy a car by getting a loan from the bank. They would be more hesitant to give you a loan since your credit score is so low. However, if your credit score ranges between 750-850 this is considered excellent. There are usually 30% of people that have excellent credit scores. Now, having an excellent credit score can be beneficial for a couple of reasons. Reason one; if you are planning to buy a house and you want to ask the bank for a loan you’re able to do so especially because your credit score is excellent. The second reason; you could receive credit cards in the mail from other solicitors this could mean that they know you have a good credit score and want you to use their credit card to build your credit score with them.
Why Are Credit Scores Important?
Those with higher credit scores who tend to receive more agreeable credit can lead to lower payments and less paid interests over the account. Even though everyone has a different financial and credit situation, different lenders could have different criteria when it comes to accepting credit. There are different types of credit scores that are used by lenders and creditors which can vary by industry. For example, let’s say you were to buy a car, an auto lender could potentially use your credit score that intensifies on your payment history when it comes down to auto loans.
How To Improve Your Credit Score?
Did you know that you don’t just have one credit score but you could have hundreds, even thousands. There are a lot of credit scores however, you’ll only have three credit reports. It’s crucial that you check your credit report, rather it’s from Equifax, TransUnion, and Experian. Most often credit and fraud reporting mistakes do happen occasionally. But, if errors occur you’ll pay an extensive price of a lower credit score along with the issues that could come with it. A second way to improve your credit is to stay on top of payments. Paying any bill on time is a good way to show lenders that you’re responsible with credit. Paying bills late, can have a severe impact on your credit score. A good way to ensure that this doesn’t occur would be setting up automatic payments. Lastly, is lowering your utilization credit ratio. A credit utilization ratio is basically a relationship that’s established between your credit card balance and limits. Choosing to pay down your credit card balance while lowering your utilization ratio will result in an improved credit score. “As a rule of thumb, you should aim to pay your credit card balances off in full each month.” (bankrate.org). Credit scores can range from 300-850, this is nothing to be afraid of. As long as you are being smart, and responsible you’re one step closer to achieving a stable and financial future.
Works Cited
“What Is a Credit Score?” Equifax, www.equifax.com/personal/education/credit/score/what-is-a-credit-score/.
Millstein, Steven, and Steven MillsteinFounder and Editor In Chief at CreditRepairExpertSteven is the Founder and Editor In Chief of CreditRepairExpert.org. Every day. “Credit Score Range: An Evergreen Guide.” Credit Repair Expert, 2 Oct. 2018, www.creditrepairexpert.org/credit-score-range/.
Black, Michelle. “How To Improve Your Credit Score.” Bankrate, Bankrate.com, 7 July 2020, www.bankrate.com/personal-finance/credit/how-to-improve-your-credit-score/.
You did an excellent job on making great points of what credit score is and how it's used. I myself had to continuously read about the credit score on what's good and bad as I may forget later on in the future. Improving your credit score was one of my favorites since, I would want to know more of that and the way how your explanation was, made me want to learn about it more.This blog is something I would look forward to later on as, it has interested me a lot.
ReplyDeleteThis is a super informative blog! Especially since most of us are really close to 18, it's something we all have to be thinking about and be knowledgeable of. Thank you for the resources that let us know where we can check our credit score. I'm pretty sure AnnualCreditReport.com lets you check your credit score from Equifax, Experian, and TransUnion from all 3 in the same place!
ReplyDeletePrior to reading this blog, I knew almost nothing about credit score. The most I knew about the subject was when I would see a commercial on T.V. on how to raise your credit score. After reading this, I now understand why credit score is so important when it comes to wanting to invest things in the future because without a good score, buying things like a car and house may not be avalible for you to do. Although your blog was well written, I'm still curious on when you start your credit score. Is it when you get a debit or credit card? Is it when you reach a specific age? Is it when you start paying off bills your debit or credit card? This is the only question that I am unclear about because currently, I have a credit card but know nothing on if I have a credit score with this card or not and this question will help me know if I need to find out whether or not I should check my credit score based on if I have one or not.
ReplyDeletethis blog made me more knowledged about credit scores and how they work. i never knew that there was a scoring system for a credit. does your credit score increase when you only use it on a creidt card or on any type of transaction. how can you increase a bad credit score. these are some things that i wished you talked about more in your piece. thanks for information this really did interest me to help me out in the future when it comes in place.
ReplyDeleteThe blog you've written is very informative. I thought it was very useful how you included multiple diagrams and graphs explaining what good credit and bad credit scores mean. Not only that, but you incorperated your graphs into your writing to further explain how to achieve and maintain a good credit score. I felt that you went above and beyond to inform others about credit scores. One thing I wish you talked more about was what actions one can take to build up their credit score? Surely everyone starts with a lower credit score or a median credit score and they have to build up to an excellent credit score. How would one go about this?
ReplyDeleteI knew Credit Score was important based on all the commercials you see on TV all the time, but I didn't know it was that important! Thank you for telling me about how credit score impacts your ability to get a loan from a bank. I guess one thing I'm still curious about is if spreading out your payments over many credit cards could lead to a higher or worse credit score. I know that paying them is important but does having many cards you manage properly boost your score alone? Just something I was think about while reading your post. I will keep this all in mind when I get my first Credit Card.
ReplyDeleteThis blog was extremely informative. I didn't know much about credit at all but I learned so much from reading this. While you answered so many of my questions about what credit is, why it matters, and how to increase your score, I was left with two questions. My first question is: how does having good credit make it more likely for banks to loan you money? I now understand, from reading this, that it's great to increase your score by doing things such as paying bills on time for various reasons. This leads me to my second question: what did you mean by "choosing to pay down your credit card ballance"? Though these question arose after reading your article, so many of my previous questions were answered.
ReplyDeleteYou did very well informing people of what a credit score is, the different ranges of credit scores and what they mean, as well as with your inclusion of statistics. It was also very informative on the topic of why credit scores are important. I didn't know that people benefit from high credit scores with lower payments and less paid interests. In addition, including different sites to see your credit reports, what exactly determines your credit score, how to maintain a good credit score, and generally, how to improve your credit score is extremely helpful.
ReplyDeleteNaomi
ReplyDeleteI loved how this blog was written very smoothly and definitely described exactly what a ‘good’ and ‘bad’ credit score is. I had always heard of having a good or bad credit score but I never truly learned what it was but now I understand why paying your bills makes it a good credit score. Not only just to ‘have’ a good credit score but by having a good credit score, it can lead to lower payments from companies and less paid interest over the account.
To add to the ways to have a bad credit score, although it is true to keep the credit scores high on each credit card that you open, you don’t want to have too many credit cards because it can make you look more ‘risky’ to lenders (Investopedia.com). Having too many credit cards open can then also be challenging to keep track of and hard to make sure all of your payments are due. If one of these payments then didn’t get paid it can lower your credit score which, as you described, is very bad. But that then raises the questions, how many credit cards is too many, and what would be the best way to keep track of all of the credit cards?
From,
Valerie Wallace
This is an important topic and you did a great job explaining how it can be use. Credit is important in our society because thats how the banks and lenders are able to take a glimpse of whether we are able to be trusted with money. Knowing the importance of credit is crucial to be able to take advatage of those opportunities.
ReplyDeleteThank you for making this blog entry I personally know nothing about credit score or anything about it but this helped me get more information on a new topic. I will certainly try to have the best credit score that i can.
ReplyDeleteIt’s unbelievable how lowly our country and our youth are being educated about things like credit scores. While we don’t necessarily know much about them, they can have a drastic short-term and long-term financial impact on our lives. Similar to how investing sooner can pay off in the long run, shifting your focus in the direction of a credit score may actually pay off in the same way, if not, even more significantly. If you think about it, many of the noteworthy financial decisions that we make in our lives, buying a house for example, are shaped or impacted by credit score, making it even more difficult to believe that most of our generation isn’t necessarily familiar with the credit score concept.
ReplyDeleteSure, credit scores don’t necessarily have a direct impact on our financial lives and financial stability, but making healthy and intelligent financial decisions can have a positive impact on credit score, and using the credit score as a gauge for financial stability may be necessary for this current generation. All in all, credit scores can have a tremendously positive and/or negative impact on your financial stability and decision making. And educating the youth about things like credit scores will certainly prepare this next generation for unmatched financial success, something that our country should definitely be working towards.
Isn't this super interesting!! I think it's so crazy that a simple number can impact so many things in your life. I also find it annoying that you can't start working on your credit score until you're 18. Thinking about me getting an apartment in May of next year, only 5 months after my 18th, how am I supposed to increase my credit score enough for a potential company to allow me to rent with them? In my opinion you should start out with a nigher credit score than we do when we turn 18. This way your credit is in the middle and it can increase or decrease. You would have a chance to prove you can maintain your credit before it score without actually having to work at it and make it rise.
ReplyDeleteYou did a really good job informing people on what a credit score is and why it is important to improve it. One reason my family has a specific credit card under one airline is because we get more points for that airline and get more money off of vacations. I think that is one thing that is really important is knowing what company your credit card is through because if you have a ton of credit cards through different places, you may not use the points as often as you think. I also agree with Collin D on how it is annoying that you can build up your credit score until you are 18 because there is so much time before than when you could be getting points.
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