By Caleb Schadeck | Carson City Health and Human Services
This column appears in the Nevada Appeal Wednesday health pages. It addresses topics related to the health of our community.
Tax season here! Many people across the county are thinking about their finances during this time. Since you are likely thinking about your finances, think about your credit score. These scores may seem confusing, but here is a way to simplify this complex topic.
What is a Credit Score?
In the simplest terms, your credit score is used to determine whether you can be trusted to pay back a loan, credit card balance, or even something as simple as paying rent on an apartment. This three digit number represents your history with borrowing money and paying it back. A low credit score can mean that if you borrow money, you may have to pay back with high interest rates. A high credit score usually allows you to have lower interest rates when you borrow money or buy something like a car. While it may seem odd that a number can determine if you are able to pay something back, almost every lender, landlord, and credit card company used this score.
What Impacts My Credit Score?
Many different things can make your credit score go up or down.
- Payment History – This is the thing that changes your credit score the most. It is important to pay your bills on time because each late payment, how often you make late payments, and how late you were on a payment cause your credit score to go down.
- Amount Owed – This is the second biggest thing that changes your credit score. How much you owe on each of your credit or loan accounts is important to other creditors. You want to owe less than 30% of the maximum amount on credit cards to make sure your credit score does not go down.
- Credit History – This is about how long you have had each of your credit accounts. The longer you have had an account, the better your credit score.
- Types of Credit – This is about the types of debt you have. Loans and credit cards are considered different types of debt and they impact your credit score differently.
- New Credit – This is about the number of credit requests you have made and the number of credit reports that have been pulled on you. Each time you apply for a new credit card or loan, a credit report is pulled on you. Each one of these causes your credit report to go down.
Who Determines My Credit Score?
There are three major credit bureaus that provide these scores. Experian, Equifax, and TransUnion gather your individual and financial data in order to collect it all into your credit report.
You can see this number as your financial history. The smartest way to keep track of your credit score is to look it up! You are entitled to a free credit report each year from each of the three major companies mentioned above through the website: AnnualCreditReport.com.
How Can I Improve My Credit Score?
- Pay your bills on time;
- Pay down your debt;
- Get your credit report so you know your score;
- Verify that everything listed on your credit report is yours;
- Dispute anything on your credit report that does not belong to you;
- Pay off any debt that is in collection first and as soon as possible;
- Get your debt to credit limit ratio down to 40% or less;
- Ask for an increase in credit limits, but do not use it;
- Keep the credit cards you have had the longest because longer history means better credit;
When it comes to what makes good or bad credit, each of the major credit bureaus has its own definition. These are the credit score ranges and what they mean:
- Exceptional: 800 and above
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 579 and lower
Overall the best thing you can do with your credit is to check up on your score once per year and use your credit cards responsibly.
To learn more about how to manage, establish or improve, and protect your credit, call Financial Guidance Center for a free financial counseling. We can be reached at www.financialguidancecenter.org or by dialing (800) 451-4505 or 775-337-6363. You can also contact the Financial Guidance Center to find out how you can apply for Lending Circles to begin to establish positive credit; it is a free program with no fees or interest!
Carson City Health and Human Services urges everyone to take an active role in their financial health. For additional resources and information about Department programs and services, check out our website at www.gethealthycarsoncity.org or “Like” us on Facebook at www.facebook.com/cchhs, call us at (775) 887-2190, or visit us at 900 East Long Street in Carson City.