2021 is the year of financial recovery – whether you suffered from personal financial loss from the pandemic, or you ran a business that suffered. This year is all about making smarter financial decisions and earning back the money you may have lost. Not only has the pandemic changed the way we spend money, but it’s also changed the way we look at our credit scores and how they’re used for determining if we are reliable to pay back our loans.
Today, we are going to learn all about how credit scores work in 2021 – that way, we can all do what it takes to keep our credit scores in the green for years to come! We are all about setting ourselves and you up for a successful future where we never have to worry about money or credit issues!
How credit scores work in 2021:
While lenders may look at credit scores the same, they have changed the ways they give out loans since the pandemic started. They used to give out money more freely and with fewer restrictions, but they have to make money too – meaning they had to switch up the way they do things and make some changes in the way they do business.
What credit scores are made of and the percentage of each that makes up your credit score:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
These are things that have always been used to determine your credit score, but the importance of each is a little different. Many people dug themselves into a hefty amount of debt in 2020, but lenders are aware of why and they are a little more forgiving when it comes to that, meaning they don’t tend to use that as the sole reason to either approve or deny your request for a loan. They want to see that you aren’t out opening 5 new credit cards a week that you won’t ever be able to pay back.
Boost your score the traditional way:
- Make your payments on time
- Pay off balances in full
- Don’t close credit cards even if you aren’t using them
- Don’t open credit cards that aren’t necessary such as store cards
- Increase credit limit on current cards
- Don’t use more than 30% of your credit limit
These are things that are always going to help boost your credit limit no matter what’s going on in the world. But, it’s more important now than ever to make sure you are doing all the things listed above to keep a good credit score. If you have average to low credit, lenders aren’t as forgiving with you anymore and they take their money a lot more seriously than they used to.
Be smart with your credit this year!
This year has been hard for all of us in so many different ways. Don’t make things harder on yourself by ruining your credit score and digging yourself into debt that will take you years to pay off. You may have to change up the way you do things such as spending less, using one or two credit cards that earn cash back or even paying bills ahead of time – Be smart with your credit this year!