Your Money Matters: Understanding your credit score

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Farnoosh Torabi

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Understanding a personal credit score is part and parcel of understanding your overall credit health and it can pave the way to being more financially empowered and also affording life’s milestones. When you have a good credit score it positions you to have access to the best borrowing rates – the best loans – which ultimately can help you better afford the goals you want to achieve today, and in the future.

An Excellent score is in the 700’s. Your FICO score is what 90% of lenders look – it’s the most popular type of score. It runs between 300 and 850. The closer you are to 850, the better off you are.

The factors that contribute to your FICO score are:
Your payment history – the fact that you’re paying your bills on time every month is very important. Just automate all payments to keep yourself on track.
The second biggest variable is your credit utilization – so, if you have a credit card with a $10,000 limit and you have a balance of $9,500 on it, you’re pretty close to maxed out and that’s not good.
Credit score calculators like to see that you have a variety of credit at your disposal.
Credit history – the length of your credit history is also very important.

Improving your credit score is not going to happen overnight. However, the credit bureaus are constantly updating their files every month – credit card companies and lenders are reporting to credit bureaus every month as well. So, depending on what shape your current score is in and what your goals are, it could be a matter of months before you see a marked improvement.

The top myth is “If I check my score it will hurt my score”. When several lenders and creditors check your score at the same time it counts as a “hard inquiry” but you checking your own score does not hurt it. Check your score regularly.

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