WHAT IS CREDIT SCORE? – Part of Personal Growth & Wellness -Credit Score records the way “Money Companies” see you. Money Companies are Credit Companies and Credit Score Monitoring Companies. One common thing they all have in common is looking at your “Credit Report”.
Your Credit Report is your gateway to credit-related products. It gives you access to things like apartment rentals, credit cards, loans, mortgages, etc.
The most important thing in the report is your Credit Score. Your Credit Score needs to be in good shape for you to tap into some financial services. To get your Credit Score in shape, you need to understand how credits are scored.
There are 5 main parts to credit scoring.
- Your Payment History – This is the most important factor. It relates to how you make payments on any previous credits you had. Paying your repayments on time is key. You mustn’t be late on things like your monthly credit card and other credit re-payments.
- Length of Credit History – The length of your oldest credit account matters too because it shows that you can consistently use credit responsibly.
- Credit Utilization – This is the way you use your Credit card and is equally important. You need to make sure you don’t max out your cards. Best to stay at around 30% of your credit limits (if you can). This maintains a good utilization rate. To save on charges, it’s better to pay off the amounts you spent each month. That way, you won’t incur interest charges.
- Mixing Different Credits – Having different accounts and different types of credit accounts show lenders you can manage different types of debts.
- Applying for New Credit – This needs to be on the low side. Interested companies will check your history of applying for new credit(s). It is better NOT to have many of these as it shows that you are not constantly looking for credits.