What is a credit score and why is it important?
By: Aimee Malgapo
A credit score is a number assigned to a person that indicates to lenders their ability to repay a loan. It gives a lender an idea of your reliability with money. A credit score ranges from 300, which is very poor, to 850 which is very high. A higher credit score means that you are responsible and dependable with money. Your credit score impacts many aspects of your life such as the ability to get a job or rent an apartment and your interest rate on a loan. CRAs are the consumer reporting agencies that provide your score. The three nationwide CRAs in the US are Equifax, Transunion, and Experian. What determines your credit score is your payment history, outstanding balances, length of credit history, applications for new credit accounts, and the types of credit you have (e.g., mortgages, loans, credit cards).
There are a few actions you can take if you want to improve your credit score. First, make sure you pay your bills on time. Late payments can lower your score. Try to keep your credit utilization under 30% and try not to open too many new accounts. A low utilization expresses self control and responsibility. Having a mix of different types of credit can also improve your score, but only if you are financially capable of managing multiple types of credit. Review your credit report to make sure it is accurate and up to date. Lastly, try to establish a long credit history. This factor is another way to express you are responsible for managing your credit.
Credit cards can offer many great rewards. Some examples of credit card rewards include a sign on bonus, cash back, miles when you travel, or points depending on where you shop using your credit card. Try to align your card with your interests and spending habits.
To learn more about credit scores and credit cards, sign up for the Money 101 Workshop with 50/50 Leadership. These workshops are offered every month to women from the ages of 18-26 who grew up in foster care, were homeless, incarcerated or were victims of abuse. This is a great financial resource that can help women build their knowledge on personal finance.
Resources:
How to Use Credit Cards Wisely
Understand, get, and improve your credit score
