Do you know how your credit score can affect your life? It can affect your ability to get a job or rent an apartment, the rate you pay for insurance and the ability to receive a loan, and the cost you pay to borrow money. For example, when financing a car loan of $ 20,000 for 60 months, a person with a credit rating of D will pay approximately $ 130 more per month and $ 8,000 more in interest over the life of the loan. Learn what a credit score consists of here.
What actions can damage my score?
- Stop making a payment, regardless of the amount
- Use more than 50% of the total credit limit available on your credit cards
- Open multiple credit card accounts in no time.
- Have more revolving debts than installment debts
- Close our credit cards (as it lowers your credit limit)
What is my score?
- 35% – Credit history (including payments on time and delinquencies)
- 30% – Creditworthiness (using the maximum credit limit available on your cards will lower your score)
- 15% – Age of credit (the opening date of the oldest line of credit and the average age of all the others)
- 10% Accumulated debt (including the number of credit inquiries and account opening dates)
- 10% – Credit Diversity (installment credit can raise your score and revolving credit can lower it)
What things do not affect my score?
- The debt ratio (total debt divided by total assets)
- Your income
- How long you have lived in your current residence
- Length of employment
How to improve your score:
- Pay off or reduce your credit card debt
- Do not close credit cards as creditworthiness could decrease
- Transfer your revolving debt to installment debt
- Continue to pay on time (older late payments will be less significant over time)
- Reduce new account openings
- You will have a solid credit history after years of experience
Your credit score is like a report card for your financial situation. Scores can range from 301 to 850.
A score above 730 is an A + grade and a score below 600 is a D grade. Building good credit is one of the most important things you can do for your future. How much it costs you to borrow money will depend on your credit score. The higher your score, the easier you can qualify for a loan and the less interest you pay. An A + credit score will save you $ 1,000 on a car loan and $ 10,000 on a mortgage.
Credit reporting companies also use credit score data as a marketing hook; Consumers are bombarded with television ads and emails about credit score updates and credit monitoring programs. That leads many consumers to pay subscription fees to access a score that may be of dubious value.
To add to the confusion, the credit industry is also marketing new services designed to help you improve your scores. But those programs, like Experian Boost, may not raise the score you actually need to qualify for a particular loan or service.
The credit industry’s business priorities make consumers vulnerable to financial harm, say consumer advocates. Because Americans don’t fully understand their credit scores, they are at a great disadvantage when applying for mortgages or other types of loans.
