What is a credit score & how to improve it?

Your credit score impacts many aspects of your financial life, from being able to get loans for cars and homes to the interest rate you pay. It determines deposits for utilities, job seekers’ responsibility by prospective employers, and even comes into play for insurance coverage.

A credit score is simply a rating of your past financial history- a risk rating. It takes into consideration how you have used your credit in the past. The credit score is a record of your borrowing history, and it looks to see if the borrowed money was paid back, on time, and in full. Your credit score is the track record for creditors to make future lending decisions.

Credit scores range from 300- 850 and are recorded by three credit bureaus: Equifax, Experian, and TransUnion. Your creditworthiness fluctuates as you add debt, open accounts, and make payments, so even if you have gotten off track, you can still take steps to repair it.

Ways to Improve your credit score:

Pay your bills on time.
Pay at least the minimum due amount for a debt.
Pay as much as you can each month. Shoot for paying off debt quickly.
Try to pay off your credit card in full each month.
Set up automatic payments, so you’re never late.
Set up text or email alerts to notify you of your balance and due date.
Only use 30 – 40% of your credit limit. Keep your balances low on credit cards and other revolving credit.
Monitor your credit report and dispute any inaccuracies.
Establish a long history of paying on time and using credit responsibly.
Apply for and open new credit accounts only as needed.
Avoid hard inquiries on your report.
Don’t close unused credit cards (especially your oldest one)
If you are starting to establish or reestablish your credit, you might need to set up a secure credit card.

Having good rating means you’ve shown you know how to manage your credit and debt. Good credit may help you get better access to certain loans and credit cards and, typically, lower interest rates too.