Are you a millennial just starting to establish credit? Then you should start by understanding the ins and outs of your credit score. The number assigned to a person that lenders use to gauge that individual’s debt repayment record, think of your credit score like the friend in college who you’d let borrow your clothes knowing they’d give it right back versus the roommate who would take months to return it. Like borrowed clothes, consistency and reliability are important when it comes to your credit score. But what’s a good score, how does it impact your life and why should you even care? The experts at Suffolk Federal have broken it down for millennials into the five W’s of credit, so you can be that awesome borrower that lenders love.
- Who uses your score. Your credit score is used by a lot of different people. Sure, they’re most frequently lenders but car salesmen, potential landlords and insurance companies also use credit scores. In fact, just about any time you’re trying to make a large purchase or investment (such as renting an apartment or buying a car), your credit score will be checked. (This is why this number should mean more to you than the number of followers you have on Instagram.)
- What the number means. When you first see your score, it’s hard to know what the three-digit number means. Scores range between 300 and 850 and:
- 720 or higher is excellent
- 660-719 is average
- 620-659 is poor
- Below 620 is bad
Your number can change if you pay a bill late, max out a credit card, have many “hard inquiries” (when a lender checks your credit for loan or credit card approval), a number of open credit lines or derogatory marks (accounts in collections, bankruptcies, foreclosures or liens) in your credit history.
- Where you can find your score. The three credit reporting agencies—Equifax, TransUnion and Experian—are required to supply you with one free credit report every year. If you’re looking to check your score more frequently then you can always sign up for a credit monitoring service.
- When you need to have good credit. Once you’ve established a score, your credit will impact any future purchase where you need to prove that you can afford to make a certain payment such as when you:
- Why you should care. Well, this should be pretty obvious by now. Your credit score will be with you for the rest of your life, so it’s best to get on good terms with it ASAP and stay on good terms. Having a bad credit score can hold you back in many situations, from buying a car or home to renting an apartment—or getting low-cost insurance. Not to fret: Credit scores can be improved if you some financially rough times—but it’s better to keep your score sound every step of the way than to have to fix it later.