Hi, it’s Tree Langdon from Medium and LinkedIn
Why does my credit score matter?
Banks and other lenders have to have a way to decide if you’re good with money or if you tend to get in a bit over your head.
They use something called a credit score.
It ranges from 300 (low score) to 850 (highest possible score).
They use it to decide if they will lend you money.
It’s also used to decide how much interest they’ll charge.
If you’re at higher risk (lower score), they charge you more interest.
Lousy credit scores can be self-fulfilling.
If you aren’t great with money or have little money, your score is likely lower, so they charge you more interest on any debt.
That costs more, which takes you longer to pay off, and puts you in a situation where you might have trouble paying it off.
If you have trouble paying it off, it lowers your score and increases the rate they charge.
It’s a vicious circle.
Lenders also use credit scores to decide if you must make a down payment and how much it will be.
It’s a gateway.
If your score is low, the gate might be closed to you.
Here are 4 steps you can take today
They might not increase your credit score much on their own, but if you put each of them into place, it will make a difference to your score over time.
Pay all your bills on time.
This is the one factor that makes the most difference.
Your payment history counts for 35% of your credit score.
So make an effort to make the payments.
Pay down your balances and keep them low.
If you have credit that you don’t use anymore, keep the account open because it improves your credit history.
Your credit history counts for 15% of your credit score.
Don’t make a lot of credit applications at once.
Each application can impact your score, making it fall.
They usually look at a two-year period for this one, so start now.
Credit mix counts for 10% of your score.
Lenders like to see you have lots of different credit accounts.
But remember, low balances are the key.
They want to see that you can handle credit.
They don’t want to see a lot of debt.
Lenders want people who are responsible with their credit. They look for an established history of reliability.

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This article is not to be considered investment or financial advice and is for informational purposes only. Some specific information relates to the U.S. and rules may be different in other countries.