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Understanding Credit Scores

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Saved by taylorbb@mx.lakeforest.edu
on October 20, 2017 at 11:09:36 pm
 

 What does it mean to have a good credit score and how do you achieve it?

 

 Score:

"A good credit score means credit worthiness. Lenders look at that, credit card companies, mortgage lenders. This number assigns you at what risk you are for paying back money, renters will also check this. The higher the score the more likely you are to get what you want. If you’re low risk your number is higher” (Odette James) A score above 700, is a good credit score ideally the higher the better so as close to 800 as possible. 

 

Credit Card:

 

It's important to keep your available credit limit low so you can pay it all off at the end of the month. One should use their card consistently and don't fall into the trap of store credit cards. It's best to open a credit card account according to one's affordability because opening too many accounts can increase the risk of having debt. Do not have late payments, if you miss a payment by 30 days your score is going to go down. Don't close down credit cards, but rather pay it off and still keep it even if you decide you no longer want to use it. Having a long history with your bank is always a good thing and if you end up closing that account the history disappears and it impacts your credit score. 

 

Debt:

 

Debt can be divided into a positive or a negative loan one owes. If one continues to have bad debt, which cannot be paid, it can affect one’s credit score in the future. It is important to pay it off as quickly as possible because the amount of debt you have affects your credit or when one wants to purchase a home. Interviewees suggested that “amount of debt to credit matters” (Odette James) and “Do not get too much debt” (Isaac Davies).

 

Payments:

 

 The interviewees noted that payments are a vital form to have a good credit score. They gave many examples how payments can affect one to have a good credit score. Paula Hershall noted, “you can’t be late on your payments. Be timely with your bills especially online banking.”  It is important to pay on time, and don’t miss the deadlines of the due dates. One should pay at least the minimum for credit card and loan payments. Isaac Davies stated that “having a long history with good payments” is one of the tools to not be in debt and to have a good credit score. 

 

Rates:

 

Keep available limit low, pay it on time, use it consistently and pay it off at the end of the month on time. Sebastian Percy mentioned that, “you get a good credit score by not opening up a lot of credit cards”. This can reduce the possibilities of having a large amount of debt. Having a long history with your bank and paying credit card payments, will lead you to have a good credit score. “Good credit scores… [equals] lower rates which means more money in your pocket at the end of the day” (Bret Mailer).

 

Loans:

 

They can be both commercial and personal loans. It is important to pay the loans (amount of money) on time to not have a larger amount of debt. A loan is an amount of money borrowed from the bank and depending on one’s credit score, the loan can be approved. Odette James noted that "lenders look at [the worthiness of the] credit card, companies, and mortgage". She suggested,“don’t miss loan payments” because affects one to have a larger amount of debt to pay back.

 

 

 

 

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