Your credit score is one of the most important numbers of your financial life. Many businesses from lenders to landlords and employers consider your credit when they’re deciding whether to approve your applications. (Or in the case of an employer to decide whether or not to hire you.)
Having a low credit score can make life more difficult and more expensive. It can be harder to get approved for credit cards and loans, harder for you to a find reliable transportation, and harder for you to find a place to live. When you are able to get approved, despite having a low credit score, you might have to pay higher fees and interest than if you had a better credit score. Here are a few ways to better manage your credit score
What Goes Into a Good Credit Score
A few different factors are used to determine credit scores. However, credit score is primarily based on how much money you owe and how timely you pay your bills. If you are late on a credit card, for example, it will affect your credit score. Each time you are late on a debt obligation, like a credit card or a loan, it will affect your credit score. Paying on time, every time, is the best way to build a good credit score.
Note that all the companies you have accounts with do not report to the credit bureaus. These accounts are not included in your credit score. For example your cell phone service provider and your electric service provider will typically not report to the credit bureaus each month.
While payment history has the biggest and packed on your credit score, there are a number of other things that can hurt your credit score. For example, keeping a low amount of debt, having experience with other types of credit, and minimizing applications for new credit will help you build a good credit score.
Related: What is a FICO Score?
Credit Scoring Formulas
Even though we know the things that can affect your credit score , we do not know how much your credit score is impacted by any single thing. The specific credit score formula care vary from one company to the next. Not only that, your credit score goes up and down based on all the information in your credit report. A late payment will affect one person’s credit score differently from another person’s credit score. The primary differences are in each person’s credit reports.
Maintaining a good credit score is essential to financial success. A good credit score help you get approved for the things that you need. It also allows you to save money on interest and fees.
Here are a few ways you can improve and maintain your credit score. Minimize the number of credit card applications that you put in period keep your spending within your in calm. Always pay more than the minimum on your credit card. Check your credit report at least once a year to clear up any errors that you see on your credit report. Finally, pay all of your bills on time to build and maintain a good credit score.