Your credit score: what it is and how to finesse it

person using laptop computer holding card

Adulting is that awkward transition of having unwanted, grown-up responsibilities forced upon you. These responsibilities include having to pay all of your own bills, not having the ability to say “f*ck this sh*t” because you have said bills, and keeping up with some number they call your credit score.

What is credit?

Credit allows you to be irresponsible and buy things you don’t need when you haven’t gotten paid again yet. However, what seems to be a large struggle for new adults is the concept of credit. So let’s make adulting, also known as Post-Adolescent-Bullsh*t, a little easier by showing you how to manipulate your score.

Your credit score has a few components,

Credit utilization

The first major component is Credit Card Utilization. If you’ve been swiping left and right all loosely like you’re in the Tip Drill music video, then you may have accumulated racks on racks… on racks.

At some point you’ll reach your credit card’s spending limit. So if your card has a $1,000 limit and you have a $700 credit card balance then you have a utilization of 70% (700 ÷, 1,000 = 70%.)

Creditors get finicky about anything over 30% but less than 10% is the sweet spot. This means paying your card OFF each month is IDEAL. Now if you don’t have the means to pay it down from your paycheck, don’t go emptying your lil’ piggy to pay it down. Instead see the post on using good debt and tackling bad debt.

Payment History

Don’t you hate when you’re meeting someone and they’re 20-30 minutes late? Hell yea? Hell yea, me too! Now imagine if this person was 3 days late and on top of that owed you money! At this point you might be 38 hot! This is exactly how your credit card company feels and instead of trying to catch you at the mall or creeping in your bushes they just report you to the credit bureau and “Down goes Frazier” aka your credit score. So a way to bypass this is to set repeat calendar reminders on the day of or day before your bill is due each month or to make it even easier set up automatic bill pay if your card provides this service.

Derogatory Mark

Another mover and shaker of your credit score would be a derogatory mark. This is basically anytime you let an account go into collections. This is bad, more than 1 account going into collections is a major setback to successful adulting. If you’re at the stage where it’s too late to set up automatic bill pay don’t be scared to call up your credit card company to strike up a deal (EVERYTHING is negotiable.) Otherwise they will be forced to sell your debt for pennies to a collections company. They’d much rather work a deal with you to forgive you on some of your debt and work out a new payment plan rather than sell it for pennies. Your credit card company bypasses losing out on big bucks and you bypass a derogatory mark and having collections blow up your cell or grandma’s house phone asking for you.

Age of Credit History

The fourth component of your credit score is the Age of your Credit History. As millennials our credit accounts are fairly new, unless mama or Uncle Russ opened up a water bill in our names as kids (hopefully not the case.) Since we don’t have control over the speed and passing of time there isn’t much in our control except opening your first credit account and not closing old accounts. Be sure old cards that you don’t use aren’t closed by the credit card company for non-use, buy some gum on it every 3 months or so, just remember to pay it off. Don’t be that person who gets a derogatory mark for gum.

Total Number of Accounts

The amount of Total Accounts you have show that you can balance your various credit accounts (credit cards, car loans, mortgage, etc.) Although, we can barely balance work, the gym, our situationships, and scandalous, yet addictive TV shows, but let’s stay positive. This is a very low impact component which is a good thing because CreditKarma says ideally lenders would like to see 21+ accounts, and I’m like how Sway, how? Even if you are able to get that many accounts somehow, you’d have a boatload of…

Hard Inquiries

Which is the last component of your credit score. Hard inquiries occur from just about each credit application you submit, lenders would like to see no more than 1-2 per year. A good way to not rack up on unnecessary credit inquiries is to check the requirements before submitting an official application. No point in applying for new credit if your chances of getting rejected are high. You can also apply multiple times for the same type of credit within a 10-14 day timespan and it will count as one.

If you don’t already, I suggest downloading the CreditKarma app to keep track of each individual components rating and your overall credit score.

Category: Debt
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