Tag: credit score

Today, I interviewed my credit-obsessed boyfriend, Joe. He’s an accountant, he went to school for finance, he loves money and taught me some of the stuff I know.

What’s the point of telling you about Joe? He’s a unicorn. He’s a 24 year old with student debt, who ran up his credit cards in college (which I mention in this post), and is still working toward financial stability, but he has a 815 credit score – BUT HOW?

I hope you enjoy hearing from Joe. This post is going to end my little credit score series for now, and we will move on to more fun topics like savings… and jobs… and so on. 

Why did you start building your credit when you were 18?

My parents always wanted me to be financially responsible, and I knew that having a credit card was a way to show them I can handle my own finances (partly).

Was an 800 credit score always on your mind?

No, because I didn’t think it was possible. I was pretty satisfied with my 700-720 score until I did more research and found out I can get it higher. I thought if you have over a 720 it’s pretty much perfect, but there is a long way to go from 720. As time went on, and I got a full time job, my score kept increasing. I rented an apartment, car payment, increasing my credit lines. All the things Morgan has been talking about in her previous posts, I’ve been constantly doing.

What does your credit score look like now?

As you probably know, almost all credit scores from different sources vary. As I mentioned before, when I paid off all my credit card debt, I had a max score of 815, but it is a little lower now. From Credit Karma to Chase to Discover to Experian, my credit scores range from 780s to over 800 still.

Why isn’t your score one particular number?

Different reporting agencies use different percentages of the credit factors. For example, one might use 10% one might use 12% for one of the factors. I like that I have a range of scores so that I can get an idea of where I’m at; they all move up and down together so you get the idea!

Anything else you would like to add?

I think you should start building your credit as soon as possible so that you can get to 800, and once there, you can get the best rates. Then never have to worry about getting denied from anything!

There are five factors that go into credit scores. While some websites may have one more factor or one less, for the most part, these are the factors that affect your score. The percentages given are based on what FICO uses, which is one of the most commonly used credit scores.

Let’s start with credit history, which accounts for about 15 percent of your score. Although this is not the largest factor, percentage-wise, it is very important that you start building credit when you turn 18 years old. This is 15 percent that anyone can qualify for just by getting a starter credit card.

Next is payment history. Payment history accounts for a whopping 35 percent of your score. This means paying your bills on time every month. It’s as easy as it sounds. Every month when your statement comes out, you pay at least the minimum. Now 35 percent is the largest factor that is affecting your score, so pay your bills on time and you will have an excellent payment history, and it’ll be a major boost to your credit score.

The third factor is credit utilization, which is 30 percent of your score. Credit utilization is something you can constantly work on because it has to do with your total balance vs your total credit limit. Pay off all of your cards and you will have the best utilization this is zero percent.  If you need to carry a balance for whatever reason, this could hurt your score gravely if you do not work on increasing your limits. Although for some, having a high credit limit could be dangerous, but it is a way to help not have credit utilization kill your credit score. This is because when you hold a balance on a card, the higher limit you have on all your cards lowers your percentage of credit utilization. Not everyone is comfortable having a high credit limit though, so this method isn’t for everyone.

The fourth factor is new credit. This factor only accounts for 10 percent of your credit score. Although it is a small factor, it is still a factor and can make a difference in your overall score. This factor relates to new cards that you open. When you open a new card, that’s a hit to your score. In the long run, it may help other factors, but in the short term it will lower your score slightly every time a new card is opened. A new credit card also slightly hurts your credit history factor because this factor takes the averages of the length all your accounts have been opened.

Lastly, there is credit mix, which accounts for the last 10% of your score. This is a broad view of your credit. To get a perfect mark for your credit mix, you should have credit cards, car payment, and rent or own a home. Those are the three main groups of credit, and it shows that you aren’t just collecting credit cards and you are a trusted borrower on all fronts.

All five of these factors affect your credit score. You will build your score over many years and you will get perfect credit with hard work. Hopefully, you can figure out how to work on these factors to start improving your credit score today. And remember, it begins with opening that first starter card.

You might have just read this headline and clicked it, but you have no idea what a credit score is. A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual.

Let’s break this down first, before we go into why it is important.

A credit score is 3 numbers that will stay with you your entire life; they will impact many financial decisions as you get older. Want to buy a car? Credit Score. Want to rent an apartment? Credit Score. Want to open a credit card? Credit Score. Want to buy a house? Credit Score.  

Every financial decision you make most likely will have an effect on your credit score. Credit Score is your permanent record for life.

Why now?? You can begin building your credit at 18 years of age. That means many, if not all of you, should be building your credit as you read this.

The best way to start is by opening up a credit card. A common starter card for students is Discover. Start using it and paying it off – in full – every month (that means no spending money that you don’t have!) This will show lenders that you are worthy of the “credit” and can be trusted with it.

Now, credit scores take years to build and it won’t happen overnight, but you can make it to the top bracket of the credit tiers in less than 10 years. Anyone can achieve the 800 and above score with hard work, consistency, and planning. Although there are many factors that go into a credit score and we have only talked about one today, we can continue to talk about credit scores in this blog. Tune back in for more credit score tips and you will be on the road to an 800+ credit score!

image credit: Credit Score by Nick Youngson CC BY-SA 3.0 Alpha Stock Images