The Newbie’s Guide to Credit

When it comes to your financial health, life is so much better if you can keep a good credit score. While it is just a three-digit number, it will impact nearly every significant purchase or serious financial decision in your life. Getting a cell phone, renting an apartment, purchasing a car, buying a home, or applying for a student loan all take into account your creditworthiness. This is often captured through your credit score. If you haven’t done much with your credit, here’s your guide to making the most of your financial health.

When it comes to your financial health, life is so much better if you can keep a good credit score. 

Understanding Credit Scores

The three-digit number known as a credit score falls between the range of 300 to 850, with the lower the number the worse your credit. There are two models used for scoring, either the VantageScore or the FICO, and there are three different credit bureaus that may pull your score when the time comes. The FICO scoring is as follows:

• 850 to 800 (Excellent)
• 799 to 740 (Very Good)
• 739 to 670 (Good)
• 669 to 580 (Fair)
• 579 to 300 (Poor)

The VantageScore range is the following:

• 850 to 781 (Excellent)
• 780 to 661 (Good)
• 660 to 601 (Fair)
• 600 to 500 (Poor)
• 499 to 300 (Very Poor)

You can’t know for sure which credit bureau a lender will pull your score from, making it important that you already know your score when thinking of applying for a loan or credit line. Each individual is able to request a copy of their score once a year from the reporting bureaus, though there are online companies that offer free credit score checks.

Looking at the Scoring Factors

Your credit score is determined using complex algorithms and several different factors. Knowing what impacts the score the most will help as you manage your finances and works towards building excellent credit.

Payment History (35%)

How well you manage your payments for credit accounts makes up 35% of your total score. Paying bills on or before the due date keep this a positive impacting factor. However, paying just...

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