Part 1 of 3
Do you remember in school how everyone started the year with an A, then each assignment or test affected your overall grade? You started with a clean slate and either kept yourself there, or slowly dropped your grade. Your credit score is the opposite of that. You start at the very bottom of the totem pole and (hopefully) work your way up. This is a lender’s way of being cautious and ensuring their money is repaid to them.
Your credit score is essentially the grade lenders give you based on your ability to pay money back. This number will either increase or decrease based on a variety of different factors. Your credit score can range from 300 to 850. The goal is to have the highest number possible.
Anyone who tells you this number isn’t important is living under a rock. The higher this number is, the more affordable your future will be. Maintaining a higher credit score will allow you to have lower borrowing interest rates, excuse you from initial deposits on cable or utility services, have a higher credit card limit (we’ll get to why this is a good thing in part 2), borrow for longer periods, and most likely end global warming.
Your credit score will be ranked into one of the following five categories.
Excellent: 750 and above
Good: 700 to 749
Fair: 650 to 699
Poor: 550 to 649
Bad: 550 and below
So, how do you know what your credit score is?
Equifax, Experian, and TransUnion are the three main credit bureaus that are responsible for this information. However, Equifax suffered from a massive data breach in 2017 so this data may be greatly skewed from the other two bureaus. If it does vary more than a few numbers, this may be due to identity theft and should be reported ASAP. Each bureau may also have different information from your financial history. One may have your car loan, and another might not have access to that information.
Since the information from bureau to bureau may vary, the three came together and created VantageScore to create consistency. This ensures accuracy by piling the past 24 months of activity into one score. In the past, a credit report would list codes and explanations as to why your credit score wasn’t higher. VantageScore has taken this and simplified it. Your credit report with VantageScore will now have fewer codes and will be written in English. Imagine that?
Your credit score is factored solely on your financial health. Your score never takes gender, age, or religion into consideration. This is beneficial because everyone starts on the same playing field. No one is favored off the bat because they were born into a wealthy family or has better hair, we all start from scratch.
What’s the easiest way to check your credit score?
Any of the websites provided in the link above will tell you what you need to know. Credit Karma is my absolute favorite because it’s idiot proof. It tells you exactly what your score is, why, and the ways you’re able to improve.
When I first checked mine a few years ago, I was surprised at how mediocre it was. I didn’t have a very long credit history, and I had missed a few payments.
That was an understatement. If we’re being totally honest here, I drunkenly opened a Target credit card shortly before I left the country for over a month. I was too busy clinging to my college, carefree attitude that I refused to check any of my emails. By the time I returned and caught up on life admin, I was a few months overdue and my credit score took a pretty big hit. One wrong move took me straight to the bottom.
You know who else started at the bottom? Drake. And now we’re here. Everyone starts with bad credit. Do you think his mom ever had to co sign a loan for him? Probably.
Is everyone as pumped for parts 2 & 3 as I am? No? Okay, cool.
How do I Build Credit?
Again, the biggest thank you to Zack Mathis for the mad copy editing skills.