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Life Launch: Credit Score

Your credit score is very important. It’s a number between 300 and 850 that tells lenders how likely you are to pay off your loans. Your score can determine whether you can obtain a credit card, loan, apartment or insurance, and it can affect interest rates you are offered. 
 
Understanding your credit score can seem daunting, so let’s cover the parts that are essential to know.
 
How is your credit score determined?
Your credit score is determined by the credit decisions you make. If you have a credit card or loan in your name, how you pay them off affects your score. Timely payments will improve your score, and late payments will decrease it. Your total debt and number of credit cards can also impact your score.
 
What’s a good score?
The higher your score, the more confident lenders are in your ability to pay off a loan. The lower your score, the less confident lenders are, thus decreasing your ability to get promotional rate offers, flexible payment options and preferred loan terms. Your credit score, also known as your FICO Score, helps lenders make accurate and reliable credit risk decisions.
 
800 - 850 is excellent
740 - 799 is very good
670  - 739 is good
580 - 669 is fair
300 - 579 is very poor
 
How do you find your credit score?
There are many online tools to determine your credit score, but be leery of unofficial sources or those that require payment. The government allows you to access one credit report from each of the three major bureaus each year free of charge. Visit www.annualcreditreport.com to request yours. 
 
How do you improve your credit score?
If you’re not quite happy with your credit score, there are ways to improve it. Because your score is based on your credit activity, improving your financial decisions will impact your score.
 
Make payments on time and for the correct amount; be sure to pay at least the minimum due.
Avoid overextending your credit with too many credit cards; this includes store and gas cards.
Refrain from taking on additional debt.
 
What if you don’t have a credit score?
If you don’t have enough credit history, you may not have a credit score. However, there are ways to establish credit. Talk with your banker about obtaining a secured credit card, which is backed by a cash deposit, or a credit-builder loan, where the loan balance is secured through your savings account. Other ways to establish credit may be to consider getting a co-signer for a loan or becoming an authorized user on someone else’s credit card.
 
A credit score may affect your future financial success, so know what your number is and take steps to improve it as you launch your life as a young professional.