Credit Scores

 

You see a lot of commercials about getting your free credit score, but what exactly is a credit score? 

 

A credit score is a number showing how responsible a person is with repaying charged amounts. This number is used by investors or people who you are buying something from to see if they actually want to sell this item to you (keep in mind, these items are most commonly loans or houses, pretty big-ticket items). 

 

Credit scores range from 350 to 800, the higher number the better your credit. A bad credit score would be considered anywhere in the 350-650, and an excellent credit score being above 700. 

 

Credit scores affect a lot of things. If you have a really bad credit score, most companies won't let you take out a loan, buy a house, or even withdraw money from your bank account. Also, credit scores affect interest rates on loans. The higher the credit score, the lower the interest rate, and vice versa. 

 

What makes up my credit score?    

 

Your credit score is made up of 5 key elements: 

1. How long you've been making purchases (longer history=greater value): 15%

2. Types of things you have to pay off, i.e. bills, loans: 10% 

3. Credit Inquiries, or how much someone has looked at your credit rating (usually more times is worse than less): 10% 

4. Payment history, or if you pay on time or not: 35%

5. Total owed to companies, i.e. bills: 30%

 

 

 

Things that help and hurt your credit score 

 

Help: Don't take out more money than you have 

Help: Pay all your bills on time, all the time

Help: Keep credit accounts that you've historically paid on time

Help: Check your credit report once a year for accuracy

 

Hurt: Exceed limits on credit card accounts

Hurt: Miss a payment or fail to pay a minimum amount due 

Hurt: Apply for a lot of credit accounts in a short period of time 

Hurt: File for bankruptcy 

 

 

Getting your "free" credit score 

 

Most websites say that they give free credit scores, yet they will charge you a week or two later for their service. The websites that we reccomend you to use are Equifax, Experian, or TransUnion. These are free credit checkers. Here's the downside though: You get one free credit report per year. Often, by signing up for this report, the websites automatically sign you up for their other services. You have to unsubscribe from their plans before a week after your credit report, or they will charge you fees.