Credit Scores 101: What impacts your credit score?

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Credit scores are a confusing topic, and if you don’t understand what it means and does for you, you need to take some time to learn. Your credit score can either hurt or help you when you go to buy a car, get an apartment, or buy a house. You want to understand your credit score, and what affects it.

Here are the top 3 things that impact your credit score:

      1. Credit Utilization

Credit utilization represents the amount of money you used out of your total credit limit. For example, if you’re credit limit is $4,000 and your balance is $2,000, you’re utilizing 50% of your credit limit.

A general rule of thumb is to stay under 30% of your credit limit. So, if you’re credit limit is $4,000, you want to stay as close to or under $1,200 to keep your credit score high.

      2. Credit History

You can calculate your credit history by looking at each one of your cards, determine how long you’ve had each card, add those years up, and divide by the number of credit cards you have. The higher this number is, the better your credit score will be. The lower the number is, the lower your credit score will be.

Fun fact: Have you ever paid off your student loans, or closed a credit card, and noticed that your credit score was negatively affected? This is because when a loan or card is closed, that history disappears along with it. With that history gone, your credit history number is lowered, lowering your credit score.

     3. Making your payments on time

It sounds simple, but this is the key to a high credit score. By making your payments on time, you are showing your credit card company that you are a responsible spender and that they can trust you moving forward.

Now that you understand what affects your credit score and how you can improve it, be smart about your spending and take every action you can to increase your credit score.

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