Credit scores are just another important financial factor that we are not taught in school, so if you aren't sure what a good credit score is, you are not alone! Read on to find out what score is considered "good" and a bit on how to increase your score.
Credit Scores Unlocked
Excellent = 800 - 850
Very Good = 740 - 799
Good = 670 - 739
Fair = 580 - 669
Poor = 0 - 579
Now that you know what number to shoot for, how in the heck do you find your credit score? Well, good news! It's super easy if you have a major credit card. Most major credit card companies will provide you with your credit score listed on your monthly statement. You may even be able to see it when you log in to your account online. You can also request a credit report, but more on that in my other blog post.
Understanding Your Credit Score Factors
In order to improve your credit score, you need to understand what factors impact it.
~ Payment History: Whether or not you make your payments on time makes up 35% of your credit score, which is the largest factor. If you've made just one late payment, this will negatively affect your score. But don't get discouraged! Move forward & commit to making all your payments on time. You will see your score increase.
~ Amount Owed: This calculates the total debt you are using (your balances) compared to the total amount you could spend (your credit limit). This makes up 30% of your credit score. You want to make sure that the total you owe is less than 30% of your credit limits. So if you have one credit card with a $1,000 balance, you never want to owe more than $300. For this factor, paying off debt and/or increasing your credit limits will help increase your credit score.
~ Credit History Length: This just means the total amount of time you have had credit. This makes up 15% of your credit score. For this factor, there is nothing you can do to help increase your score other than be patient, or apply for a credit card if you do not currently have one. Remember, bad credit is equal to no credit.
~ Credit Mix: This factor looks at the different kinds of credit you have. Having only credit cards will only get you so far. Creditors want to see that you have things like credit cards, car loans, personal loans, etc. This does not mean you should rush out and apply for a personal loan, but just be aware that this does impact your credit score. However, this only makes up 10% of your score.
~ New Credit: This includes the number of credit accounts you have recently opened and/or applied for. Multiple credit cards opened in a short period of time will negatively affect your credit score. However, new credit does not impact your credit score for a long period of time, and only makes up 10% of your overall score.
Now that you are armed with the knowledge & understanding of what factors make up your credit score, you can start to make changes to improve your score! For most people, it's being patient and establishing credit, or paying off debt that will have the largest impact on increasing your credit score.