Written by: Isabel P.
When thinking about a credit score my mind went straight to a credit card and a very important money. Did yours go there too? Don't feel bad because that’s a great step in the right direction. A credit score is a number that evaluates and rates your “worthiness” based on your credit history. With this money lenders decide whether to approve you for loans or credit cards, and determine the interest rate to charge you with. A credit score usually lies between 300 to 850, a “good” credit score is considered to be in the 600 range. Now that you know some of the basics of credit scores let's get into how they work and most importantly how you can grow yours.
Credit scores are generated by two major companies: Fair Isaac Corporation (FICO) and VantageScore Solutions. These scoring models allow for credit scores to be automated faster and in a much more timely manner than the independent lender having to go through your entire credit history. To understand more how we can improve our creation scores we also need to take a look at what makes up your credit score. The components that make up your credit score are: payment history, credit utilization, length of credit history, new credit, and credit mix.
Your payment history shows how good you are at paying in a timely manner. Your credit utilization ratio measures how much of your available credit you're currently using, if you are using a high portion of the credit lines that you have. The credit history is based on many things, including the ages of your accounts and the average age of all your accounts. Now that we understand more about the factors that go into your credit score, how can we make it as high as possible?
The first and most important of strategies is to PAY YOUR BILLS IN TIME. As we saw in the breakdown of how your credit score is calculated, payment history is the fact that affects your credit score the most. If you continue to be a timely payer your credit score will start to go up with minimal effort. Another thing that you can start to do is making more frequent smaller payments. These “micropayments” keep your credit card balances low to improve your credit over time. Simple small monthly payments like your Netflix subscription or filling up your gas tank are things that you are spending money on every month and are doable payments to add to your credit card. Following these small steps you can start building up your credit right now!
Are you ready to start building up your credit score? What are some goals you want to reach that having a good score can bring you?
Works Cited
O'Shea, Bev. “8 Ways to Build Credit Fast.” NerdWallet, 2 Mar. 2021, www.nerdwallet.com/article/finance/raise-credit-score-fast#1-pay-bills-on-time-1150028167.
Pritchard, Justin. “What Is a Credit Score?” The Balance, 29 Sept. 2020, www.thebalance.com/what-is-a-credit-score-and-why-is-it-important-4691429.
I really enjoyed reading this piece. I think that bringing light to credit scores was a very good idea on your part. A lot of people, especially our age don't know much about credit scores, me being one of them. The information you provided in this piece such as what a good credit score was and how they're made up, was really helpful.
ReplyDeleteThank you for the informative and easy to understand article. I just got a credit card to build my credit history for student loans, and I feel like there is very little explanation on how credit scores actually work. I'm sure they probably provide that information in the informational pamphlets they send with the card, but those have really small font and tend to be worded in ways that a young adult such as myself cannot understand. So I appreciated you making it an easier concept to understand.
ReplyDeleteYou worded everything very well. I knew the basis of credit scores before reading this and now after reading what you wrote I understand more than I did. I like how you brought up paying for your Netflix subscription or just paying for gas on a credit card is a good way of building your credit score.
ReplyDeleteI think this post was super insightful, especially as we are able to begin to build credit soon and some of us already can. You included many helpful tips to maximize our credit which was also reflected in the visual which helped me a lot. After reading, I had one question which was as you build credit and your limit increases, are you expected to spend more money? I think as you grow older and have more responsibilities you likely will regardless, but I wanted to hear your thoughts.
ReplyDeleteAs your credit score increases you are not necessarily expected to pay more every month. As you continue to pay off your credit card in time, they increase the amount of money that you are able to spend every month, they kind of increase the amount of loaning they will give you every month. And it is true that as we get older we acquire more expenses, but that doesn't mean that they require you to pay more to continue increasing your credit score
DeleteI really like this piece and find it useful because I feel like as teenagers we hear a lot about credit scores through commercials for things like “credit karma” and other apps and businesses like that, but we don’t know exactly what it is or how it works. I like how you also gave some strategies for keeping a good credit score, one of those being paying your bills on time which is super important. Credit scores are important because if you don’t have a good credit score, then a bank is less likely to give you a loan or something. What is the average credit score for an American?
ReplyDeleteYour piece was very beneficial for me to read because I am turning 18 soon, and I heard its good to get credit card as soon as you can because it could take some time to build a solid credit score. Your blog was very informative and taught me how to maintain a credit score, (by keeping up with my bills) and making sure im really budgeting myself. Your blog also taught me what credit scores can be used for and why its important to maintain a good score. (housing, banks, loans).
ReplyDeleteThis was something that was super super interesting to me because when seeing a car ad or other important ads that state, “We can help you even with a really bad credit score.” I didn’t understand it before but now I do. I didn’t know how important it was to make sure that you pay your bills on time. It’s interesting to see that if you were to add some of your monthly subscriptions to your credit card it can grow your credit score by even the slightest bit. I personally am not the best at paying bills on time but seeing this now really makes me think about how important it is to may them on time. Great Job Isabel!
ReplyDeleteI found this piece very interesting because I guess I don't know much about credit scores, I thought it was just paying your bills on time but I think it's very interesting that just adding monthly subscriptions on your credit card could even improve your score. Great job!
ReplyDeleteMy dad always told me that when I'm 18 I should take out a loan, so I can start building up my credit score. I think that it sucks that some people can ruin their credit when they are younger and then when they're older and more responsible, they can get denied for loans, credit cards, etc, but at the same time, banks lending out money to people with poor credit helped cause the 2008 recession. I never knew that credit has so many different components.
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ReplyDeleteI have always known it is important to make sure that you pay your bills on time, but I haven’t always known how having a strong credit score can benefit you. I thought your suggestion of adding some of your monthly subscriptions to your credit card was smart because it is an easy way of growing your credit score passively. I have also heard of people paying their rent or mortgage with their credit card in order to raise their credit score and get more points. You definitely have to be super on top of paying your bills then. Great Job Isabel!
I really enjoyed reading your blog article. It was very interesting to learn about the credit reporting companies. In another class I learned that you can get free credit reports from Equifax, Experian and TransUnion. Another thing that I found interesting was the chat that showed the percentages of the components that make up your credit report. Something that I would like to learn more about would be how teenagers create their own credit score.
ReplyDeleteI kind of touched on this in the blog, but you can start building your credit now! If you are not 18, your parents can open a joint credit card with you that will start building your credit. You can use it to pay for when you go out to eat with your friends or for gas. And although it's joint with your parents, it still builds your credit. Once you turn 18 you can open your own credit card and keep building it with other purchases and your monthly subscriptions. And if you're moving out, use it to pay for rent! That’s always a steady payment that you make sure you pay off and it's an easy way to keep increasing your credit score!
DeleteI think that credit scores are both fair and unfair. It makes sense to rate someone's credibility by their payment history but it could be unfair to those who have fallen on hard times. This system works well but could be tweaked to be more forgiving to those who need it.
ReplyDeleteThis was really good for me to read because I am almost 19 now & I have never checked my credit score. I know its important & reading this blog helped me learn why I have it & how I can keep is a good number! thank you!
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