Age: 25
Hometown: Birmingham, Al
Current location: Birmingham, Al
Undergraduate Major and institution: Business Management at Auburn University
Read Morepersonal finance
Age: 25
Hometown: Birmingham, Al
Current location: Birmingham, Al
Undergraduate Major and institution: Business Management at Auburn University
Read MoreWhile writing the "maximize your credit score" post, I realized I should first discuss the basics of credit scores! I'm happy to answer any questions in the comments section.
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Your credit score is a measure of how reliable of borrower you are. It is developed from your credit report using one of several scoring algorithms. There are multiple scoring models developed by multiple companies; your credit score can vary depending on which algorithm a company uses. FICO develops the most commonly used algorithms, but there are even multiple FICO algorithms. No matter which algorithm is used, the score is only based on information in your credit report.
Lenders access your credit report when you apply for a credit card or loan. Leasing companies also use your credit score and payment history to determine if you’ll be a good and reliable tenant. A higher credit score means you are a less risky loan candidate (less likely to default on your loan). A higher credit score will result in lower interest rates and higher loan amounts. A low credit score may prohibit your ability to get approved for an apartment, credit card, or loan.
TransUnion, Equifax and Experian are the three bureaus that maintain credit reports. I recently requested by credit report from Equifax and these were the main sections included --
Yes. Defaulting on your student loans will negatively impact your credit score, but deferring on your loans will not.
FICO scores range from 300-850. The higher the number, the better your credit - meaning the less of a risk you are to lenders. Here is a general range from nedwallet.com.
300-629: Bad credit
630-689: Average credit
690-719: Good credit
720 and up: Excellent credit
Now that we've discussed saving for big purchases and emergencies instead of putting them on credit, it's time to discuss the good things about credit! In this post, we'll discuss establishing great credit so that you are eligible for loans with low interest rates and a credit card with a great rewards program. More to come on choosing a credit card and using credit wisely later!
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