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How to Adult: Credit Scores

With this comprehensive how-to, learn what credit is, why it matters and what you can do to improve it.

With this comprehensive how-to, learn what credit is, why it matters and what you can do to improve it.

Ashley Bow, Personalities Editor

Understanding the basics of credit scores and credit reports have become an integral part of adult life in America. From the biggest to the smallest charges on a credit card, payment history factors into whether a person can get that new car or afford the downpayment on a new home.

 

What is credit, and why does it matter?
A three-number summary, the credit score displays the probability, independent of income, that a person will have the ability to follow through on paying a company over time. In America, people view credit scores on a scale of 300 to 850, where 700 is generally seen as a good score.

People need good credit to buy a home or furniture and to get a loan or a credit card. Good credit also helps people receive lower interest rates on loans and downpayments. Companies calculate credit scores based on whether an individual’s payment history shows them paying bills, such as student loans, household bills and credit card debt, consistently and on time.

Though rumors have circulated saying otherwise, it does not lower credit to check the score. Typically, people order their credit score from Experian, TransUnion, or Equifax. Thanks to the Fair Credit Reporting Act (FCRA), every American may request one free credit report from each of these agencies every 12 months.

 

What makes a credit score different from a credit report?
This FCRA also allows people to dispute items on their credit report in order to correct their credit score. Credit reports do not come with a credit score, but people may request them for a fee.

Instead, credit reports allow individuals to see what events have affected their credit in the past. Viewing these documents also let people know whether they need to dispute anything on their report in the event of a stolen credit card or identity.

 

How can a person raise their credit?
Quite simply, a person can ensure they keep a good credit score if they manage their money efficiently. Avoid making non-essential charges on a credit card. It may seem tempting to buy extra items on a credit card because the money does not automatically come from your wallet. However, if you don’t have the money to buy it at the time of purchase, you probably won’t have the money to pay the credit card company back at the end of the month.

 

On that note, paying all bills on time is also important. Every time you do this, the company which gets paid sends a note of this transaction to the credit company. However, they do the same thing every time a person doesn’t pay their bills on time. Therefore, every one of these transactions affects credit one way or another.

Finally, disputing false items on a credit report is highly effective in maintaining an accurate credit score. If someone gets ahold of your information, they can easily make charges under your name and lower your score. Keep a close eye on the credit report to ensure this type of issue never occurs or is quickly fixed.

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