Credit score is an important piece in our financial puzzle, but what is scary is that, according to a recent survey by LendEDU, 25% of millennials do not even know what that is. Considering the wide age range of millennials, some are 35 years old, as little as 15, but those that have been out of college for upwards of a decade should be well aware of not only how important credit score is, but what it is in the first place. Not only are their important pieces that make up credit score, but they’re extremely important in making up your credit score that will decide your future monthly payments of market interest rates.
What is Credit Score?
Well for those that do not know, credit score is what makes up your personal score that, between 350 and 850, shows the lender how a responsible borrower you are, based upon your financial past and present. The higher the score the better, which will decide not only loan approval, but at what market interest rate you will be approved for, of which the higher APR you have on your mortgage, credit card, or loan, the higher you will be paying in interest, and the higher monthly expense you will be responsible for.
Never Miss a Payment
Credit history shows a lender how you have held up your end of the financial agreement between you two, so it is important to make sure that payments are made on their due date, not only because after could cost you in late fees and possibly an increased interest rate, but if you are more than thirty days late it will show up on your credit report. Sure, we all make mistakes, but this ding on your credit report could stay on there for seven years, slapping you in the face every time you have your credit pulled.
Avoid Charging Up Debt
Now there is good and bad with using a credit card, and it all depends on what you can afford to pay back, so it does come with responsibility and discipline on using a card. A large part of your credit score is the credit availability, so the difference between the total credit line compared to the debt you have, so the larger you can keep your limit and the smaller balance you keep, the better your score will be. So, using your card is great for building credit, as well as any rewards dollars or points that come with your card, but when the statement comes in the mail, you need to be able to pay off by the due date, otherwise you will begin to be charged interest, and that will wipe out any gain you have received from any reward, as well as lowering your credit score by keeping a balance. So, if you have plenty of willpower, credit cards can be actually very smart to do, as they also come with great fraud protecting, not having to worry about cleaning your bank account if your debit card was compromised, but they can put you in a whirl of debt if you’re not careful.