Your credit score is quite possibly the most important set of numbers that you’ll ever have to encounter in your life. It’s a three-digit score that tells a story to creditors about you, and it plays a huge role in whether they approve you for things like homes, credit cards, loans, cars and so on.
Credit reports give a full detail of what credit scores depict. They are both snapshots of your credit history or the way that you have handled yourself and are handling yourself with creditors. Several things factor into the score and they are:
- Payment history (35 percent)
- Amounts Owed (30 percent)
- History Length (15 percent)
- Credit Type (10 percent)
- New Credit (10 percent)
These categories formulate a number that falls in between 300 and 850 according to the FICO scoring system, which is the most popular. Where you fall on the scale determines your approval odds and your interest rate.
For example, if you have an 800-credit score, you may be able to get an auto loan with 6 percent interest rate. If you have a 500, you may be able to get an auto loan, but your interest could be 28 percent or higher.
The Importance of Credit
It’s important for you to have credit because some things in life cannot be purchased without it. Unless you have $200,000 sitting around for a house or $30,000 or more for a car, you need credit to get such things. Your credit score can also affect you in terms of getting approval to move into a new apartment.
In short, you can’t navigate through this life in this world without having a decent credit score. Fortunately, there is eventual forgiveness, and there is a way that you can chip away at your balances and the negativity and re-establish yourself.
Raising Your Score
If we had to break down how to keep your overall score good, we’d break it down into the following tips:
Make your payment on time. Absolutely no late payments.
- Order your free report and dispute inaccurate information.
- Keep Inquiries to a minimum.
- Double up on payments.
- Keep revolving debt (credit card) usage under 30 percent.
- Keep older accounts open.
- Pay charged off and collections accounts.
If you follow these tips, you can maintain a positive score and even recover from a rough patch in life. In some cases, you may have to speak to a credit repair company and allow them to assist you.