Credit score? Who cares? It’s just a number, right? No. It’s not. It matters and you should care.
Over 50% of people don’t even know their score, so if you’re in that camp, it’s time to change. Issues around credit are probably one of the most misunderstood personal finance topics out there so we’ll break it down for you.
Most importantly: check your score often. There are two great sources that we trust: annualcreditreport.com (the only Federally sponsored site - you can’t get your score here, but you can check your report) and creditkarma.com (it is free (completely) and you can get your report and score).
Get informed: 50% of people in the U.S. have a 692 or lower. A good score is considered 700 or above, and hence a score to shoot for. Having a better score can get you:
- Access to credit and debt when you need it.
- Keeps your APR (interest rate) low.
- Can save you, on average, $250,000 over the course of your life. We're up for saving a quarter of a million dollars, are you?
What you can do: the biggest things to build your score or keep it high are:
- Make your payments on time. All of them. Missing a payment can be detrimental, so don’t do it.
- Use a small fraction of your available credit. Use less than 30% and try to use only 1-10% for best results.
- Have a variety of types of credit such as a credit card, car loan, personal loan, and/or student loan.
- Keep your cards open. Keeping your revolving credit cards (most regular credit cards) open means your total credit won’t decrease and the average age of your credit accounts won’t go down. Both factors can lower your overall score.
- Look for mistakes - some organizations have estimated that around ½ of credit reports contain errors in them. If you notice an error, call the company as well as the credit bureau to resolve them.
The credit score just might be the most important score of your life (contending are ACT and SAT scores) - for better or worse. Know yours.