Credit Score

Your credit score is one of the most important numbers of your adult life. It sounds extreme, but many many decisions will be made based on that number so it is important to take your credit score seriously. Here are a few of the things that are based on your credit score: qualifying for credit cards, financing a car, financing a home, qualifying for a rental agreement on an apartment, and even installing phone service or turning on the electricity in a new home. It all depends on your credit score. Your credit score is, after all a reflection of your credit and financial history.

There are five major factors that, together, determine your credit score.

What kind of credit accounts do you have? Do you have credit cards? A store account? Perhaps you are paying off a medical bill. Are you paying on a car or student loan? Having a variety of credit accounts in your history can both hurt and harm your score. It is not a good idea to open up a bunch of credit cards and then not use them, but you will want at least one credit account with a good payment history in your past or present.

How often do you open new lines of credit? If you have applied for several credit cards or lines of credit in a short period of time, this will lower your score. Financial institutions tend to see this sort of activity as an act of desperation and a sign of financial trouble.

How long is your credit history? Typically, the longer your credit history, the better your score will be, especially if you have been responsible with your credit. The longer your credit history, especially if you are responsible, the more likely you are to be seen as somebody to be trusted with a loan or a mortgage.

How far in debt are you? If you owe a great deal of money, this will lower your score. This is lowered even further if the amount you owe is due to a large amount of lenders and creditors. Owing a large amount of money to a large amount of people makes you look like a credit risk, even if you have been paying diligently on each account. The more money you owe, the less likely you are to be able to take on future lines of credit.

Your payment history is the biggest factor in determining your credit history. If you have a sketchy or irregular payment history, your score can be lowered dramatically. If you do nothing else in your adult life, make sure that you pay your bills on time. Your payment history stays on your credit report for seven years. That means those two payments you missed six years ago when you were out of work are still affecting your credit score.

Credit must be taken seriously. Make sure you understand your credit score and what factors are taken into consideration when determining your score.

Credit in Minutes Tip #1

Stay on top of your credit report. Most credit reports contain errors. Make sure you check your credit report every year (you get one free credit report every twelve months) and if there are errors make sure to challenge them with the reporting credit agency. Credit agencies are required to investigate each and every challenge that gets reported.

Credit in Minutes Tip #2

Just because you qualify for all of those credit cards does not mean you should get them. A person with too many credit cards looks sketchy in the eyes of a potential creditor. Think of it this way: if a person is financially stable does he or she need ten different credit cards? Wouldn’t just one or two suffice?

Credit in Minutes Tip #3

The best way to raise your credit score is to make all of your payments on time. It sounds too simple to be true, but that’s all there really is to it. Staying out of debt and/or making all of your debt payments on time will keep your score up where it should be.