A little while ago, I got a student credit card. One reason I did this was because I knew I needed to “build credit” ... but I didn’t actually know WHAT that meant.
After doing some research, I learned more about credit, as well as what’s considered “good” and “bad” credit scores. Hopefully, this info can help some other new credit card holders like myself who are still trying to figure credit out and how to use it wisely.
A credit score is a tool that banks, landlords, employers, and others use to understand how you manage money. Essentially, the score puts a number on how risky you’ll be to lend money to, rent an apartment to, employ, etc.
The most commonly used credit score is the “FICO” score. Until a few weeks, this was just an acronym I saw in my credit card app. Now, I know that FICO stands for “Fair Isaac Co.,” and this is literally just the company that computes everyone’s credit scores.
Credit Score Ranges
The lowest FICO score you can get is 300. However, I found out that anything under 600 is generally considered “poor,” meaning you’d be seen as a risky borrower. The best FICO score you can get is 850, but anything above a 700 is generally considered excellent. In that range, you will likely be considered a dependable borrower in terms of lending.
Different lenders can have different criteria for what they consider “poor” and “good” scores. That’s why it is important to have credit habits that are as good as possible. Ways to maintain and improve your score include paying your bill on time, not going over your credit limit, and paying at least (but not always) the minimum every month.
I also found out about something called delinquency. When you are delinquent on your credit card, it means you have missed a payment.
After the first missed payment, you are 1 day delinquent. By the second missed payment, you’ll be 30 days delinquent—which can start negatively affecting your credit score. Once delinquent payments get into your credit history, they can stay there for up to 7 years, which can hurt you long after you’ve payed off that debt.
After finding all of this out, I am trying to get my score to at least 750 before I start school in September, I’m currently at a 702. My credit card’s mobile app features my FICO score, and while I frequently checked it to see my how my credit score was doing, I now know what to look for.
I’m also going to be WAY more alert when it comes to paying my bill. The last thing I want is to make a minor mistake and be punished for it for 7 years.
Does anyone else know anything about credit scores? Any tips on how to maintain a really good one? Sign up or log in with your Salt account to share below!