We live in a world of credit. But how much credit we are actually given usually comes down to just one thing: your credit score.
This number can have a big impact on how much you pay in interest on loans, what kind of places you can live, and even job prospects, so today we're going to take a look at where this number comes from, and a few easy ways keep yours in good shape.
📰 In The Headlines
The business news stories we're watching
🇺🇸 100 Day Kick-Off
Biden wasted no time getting started on his first day in office, here is what his team has accomplished already:
- Biden signed 10 Executive Orders on his first day, mostly geared toward addressing the COVID crisis
- VP Kamala Harris swore in three new Senators, cementing Democrat's majority in Congress
- White House released their plan to reopen schools before March
🇨🇳 China Watch
Yesterday's inaugural events overshadowed developments in a few important headlines about our relationship with the Red Giant
- Jack Ma makes his first public appearance in months, causing Alibaba stock to spike
- China Slapped Sanctions On 28 Trump Administration Officials, Including Mike Pompeo
- Twitter locked a Chinese embassy account after the US officially declared they are committing genocide and crimes against humanity against Uyghur Muslims and ethnic and religious minority groups who live in Xinjiang
📈 Market's Pop Off
The Dow and S&P saw tremendous gains yesterday, here are a few stories behind the Bullish Market
- Stocks had their best inauguration day rally in decades
- More people are taking out loans, leading to a bump in Bank performance
- Car company stocks are climbing from a surprising Q4 and electric car developments
💳 Where Credit is Due
If you have ever applied for a credit card, bought a car, or rented an apartment, you have has someone ask about your credit score. This number can have a big impact on how much you pay in interest on loans, what kind of places you can live, and even job prospects, so it's important to know how to keep that number high.
What is a Credit Score?
A credit score is a ‘grade’ of your ability to handle credit. It gives lenders a quick way of knowing whether you repay borrowed money and pay bills.
How does it work?
Credit card companies, banks, or other lenders you are using regularly report to Credit Rating Agencies (CRA’s) on how much debt you owe to them and whether you're paying your bills on time. Debts from public tax liens or bankruptcies impact your credit score as well.
There are three major CRAs in the U.S.; Equifax, Experian, and TransUnion, and they are all publicly traded, for-profit companies. There are other smaller, specialized agencies, but when creditors and lenders check your credit, they'll very likely do so with one of the major CRAs.
What is a Good Credit Score?
Most credit rating agencies score on a range between 300-850. For them, a credit score of 700 or above is generally considered good. A score of 800 or above is considered to be excellent. As you can see below, most credit scores fall between 600 and 750.
5 Ways to Raise or Maintain your Credit Score
The actual rubric for how credit scores are graded is more mysterious the the TikTok algorithm, but here are a few tips from experts on how to boost your score.
1 | Pay Bills on Time
The most influential factor in your credit score is your payment history, so staying on top of bills is crucial. Just one late payment (overdue by 30 days or more) can damage your score.
FICO recently reviewed the profiles of consumers with scores higher than 795 and found that 96 percent of them had no late payments on their credit reports.
2 | Don’t Apply for Too Much Credit
Applying for several credit cards in a short period sends a signal that you may be a risky credit prospect. Each time a potential lender checks your credit, the action shows up on your report as an "inquiry" -- and the appearance of several inquiries at once can bring down your credit score. If you do open new credit cards regularly, most agencies recommend waiting at least six months between applications.
3 | Watch Your "Utilization Ratio"
The proportion of how much you owe on a credit card to your card limit—known as your credit utilization ratio—is another important score component. As a guideline, experts often recommend using no more than 30 percent of the credit available to you to show lenders that you can manage credit responsibly. But, if raising your credit score is a priority, keep utilization under 10 percent on each credit card you have, and try to pay the balance off completely every month.
4 | Monitor Your Score
By keeping an eye on your credit report and score, you will be aware of any negative changes that pop up and can act quickly to correct them. At AnnualCreditReport.com, you can get a free yearly credit report from each of the three major credit agencies. Scan each report, looking for possible errors or signs of fraudulent activity, such as an incorrect credit limit on a card or an account that you never opened. Dealing with mistakes on your credit report can be a headache, so it's better to catch them as early as possible.
5 | Be Patient
Having several years of credit usage under your belt also elevates your score. If you are just starting to establish a credit history, set yourself up for success by using a credit card to make small, manageable purchases, such as gas and groceries, or ask your landlord to report rent payments to the credit bureaus. Also, some experts advise to keep your oldest credit cards open to help maintain your credit history.
Word of the Day
(adj.) When an asset is worth less than its price or recorded value. It's most commonly used when a house or car has an outstanding loan that is a larger amount than what it’s currently worth.
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