Credit: Make it or Break it

Published on 28 December 2019 by Kyla R.

As an adult, your credit score can either help your future…or harm it. Especially as young adults, many of us fall into the credit card trap where we max them out and then ruin our credit in the first few months. Here is an overview of what credit is, how to keep it high, and what it can do for you.

What is a credit score and how does it help me?

A credit score is a scoring of all the credit you’ve accumulated, how long you’ve had open accounts, and several other credit factors.

Your score can do many things for you, however. If it’s good, it will do good for you. If it’s bad, it’ll likely only pull you down.

Let’s get an example. If you have a low score, you’re likely to pay thousands of dollars extra on a mortgage, auto loans, and other loans that refer to your credit score.

Reasons to have a high credit score:

  • Security Deposits may be waived
  • Savings on interest rates and loans
  • Access to credit cards with lower rates and more savings
  • Lower insurance premiums

Why do you need a good credit score?

What is the likelihood that you will save up hundreds of thousands of dollars for a house, and then pay it off in full? Unless you are planning on renting places for the rest of your life or saving until you have enough, a home mortgage is likely your best bet. In order to get a fair deal, however, you will need to boost your credit score and keep it as high as possible or else you may be paying thousands of dollars more than someone else.

You don’t have only one credit score.

There are three main credit bureaus who hold the information that create your score. You are allowed to get one free score once a year from all three, but websites such as CreditKarma help formulate one several times a month and will alert you of any changes, as well as offer cards that you can look into.

How to grow good credit:

Paying your bills on time is one of the most important aspects. Not only will your payments increase if you don’t due to interest, but it will be bringing down your score.

Your total accounts. Every card you open and every loan you take out will add to your number of total accounts. Too many accounts can look poor, but having a good mix always helps.

Length of credit. This part of your score considers both the age of your oldest account and newest, as well as the average. The shorter the amount of time, the more it will weigh down on your score.

Inquiries. If you are constantly making hard inquiries (meaning you are applying for new credit cards or loans) your credit score may reflect it. They typically score this based on the last 12 months.

Revolving Utilization. What is that fancy phrase? Simply put, it’s how much you owe on your accounts. This is calculated as a percent of how much you owe based on your total credit limit. So if you have a limit of $3,000 for example and are maxing it out every month, it will poorly reflect on your score.

As a young adult, my first decision was to apply for a credit card on my eighteenth birthday. For many, this is where the problem begins. I, however, was responsible with my card and actually formulated a high score! The only thing bringing me down now is my length of credit and my student loans. Here’s to high credit scores!

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