This is the first in a four-part series on some basic personal finance fundamentals.
My interest and education in personal finance came from my father, who regularly shared quality financial blogs and media with me throughout my youth. I'm by no means an expert, but, through conversations with my peers, I've realized I have some important information to share.
In hindsight, it's ridiculous that this basic human skill is not taught in our classrooms. I can't change that, but I can help you make better financial decisions, starting with improving your credit score.
What is a credit score?
It’s a number calculated from the data in your credit report and is used by lenders to determine your creditworthiness for a mortgage, loan or credit card.
Why is it important?
A good credit score plays a key role in your financial well-being. The better it is, the easier it is for you to qualify for a mortgage or car and student loans. Your score will affect whether or not you are approved, as well as what interest rate you are charged. Someone with a better credit score will usually pay less interest on their debt.
What is a good credit score?
Scores range from 300 to 850.
300-629 = Bad credit
630-689 = Average credit
690-719 = Good credit
720 and up = Excellent credit
How is it calculated?
The five primary variables are the length of your credit history (how long have you been paying loans or had a credit card?), credit mix (what type of credit? auto loans, student loans, mortgages), payment history (do you regularly pay on time?), amounts owed (how much debt are you taking on?), and new credit (how often are you opening new lines?).
How do I improve my credit score?
How should I get started if I’m a total noob?
Open a credit card and only use it for your usual purchases you consistently budget for every month (gas for your car, groceries, cell phone bills). Don’t tempt yourself by connecting it to Amazon or taking it when you shop at the mall.
Check out Credit Karma for credit card reviews and to get your credit score. You can also use WalletHub, a newer service that offers daily credit score updates.
Stay tuned for parts two through four throughout the month of January.
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