Your Credit Score is so, so, so important. The fact that we are not taught about it in high school is kind of absurd. Your credit score is a three digit number that shows how well you manage your credit and lenders use this number to determine whether or not they will lend you money. There are many purchases in life that you will either require a loan or begin to think about a loan as a way of funding the expense. Use credit well and your score goes up but use it badly and it goes down.
The benefits associated with having good credit aren’t talked about enough either, having good credit allows you to negotiate lower interest rates which can save you tens of thousands of dollars. There are a number of factors that affect your credit score, a few of them are: how long you’ve had credit, if you carry a balance on your credit cards, if you miss payments, the type of credit you’re using and many more.
It can take a while before your credit score improves also but I will talk about some ways that it can be done. Monitor your payment history and score. If you come across a transaction that wasn’t yours make sure to report it as soon as possible to avoid any of the ramifications. You should also actively monitor your payment history to insure payments are done on time, pay the full amount if possible or the minimum if not and contact the lender if you foresee trouble paying your balance. Use your credit wisely, it is typically advised that you keep your credit utilization ratio below 30% and to never go above your credit limit. Consistency in this area will result in the gradual increase of your credit score. Limit the number of credit checks and increase the length of your credit history. It is a hard hit on your credit score when you close a credit card or default on a loan. If you have a credit card it is better to keep the account open and use it every so often. It is also important to avoid getting to many credit checks either through work or by getting a number of credit cards because every check counts as a hard hit against your credit score.
There are a number of institutions that can access your credit score and based on your jurisdiction they may or may not require your consent. Some of the institutions include: Banks, credit unions, credit card companies, employers, and even mobile phone companies. These institutions use your credit score to determine whether you are suitable for a job, whether or not they will lend you money, amongst other things. It is kind of crazy to think you can get denied a job based on your credit score and some people don’t even know they have a credit score.
It is super important than when you go into any kind of debt not only do you pay it off as fast as you can because you don’t know what type of financial hardship may be lurking around the corner. But also to never miss a payment, if you anticipate that you will be missing a payment it is important that you contact your lender and negotiate the terms of your payment. They can often work with you to help reduce or in some cases even waive your payment. If you miss a payment it can significantly affect your credit score and make it that much more difficult to borrow money in the future. Other factors that can affect your credit score are: if your debts have been sent to a collection agency, any record of insolvency or bankruptcy, the amount of outstanding debts.
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