Why Your Credit Score Matters - Money Tip Tuesday

You probably know about your credit score, but do you know why it matters? In this tip we talk about your credit score, why it's important, and some tips on how to raise your credit. 

• Learn more about your credit score: https://www.nerdwallet.com/article/finance/great-credit-powerful-tool
• With a Triangle Better Checking account you can get a free credit report every 30 days when you register at idprotectme247.com. If you don't have your registration code contact Triangle Credit Union. 
• Check out Nerdwallet or annualcreditreport.com to get a copy of your credit report.

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Transcript:

Welcome to Money Tip Tuesday from the Making Money Personal podcast. 

First, it's important to understand how your credit score works. There are five factors to how your credit is scored – payment history, balances owed, age of credit, credit mix, and recent activity. Payment history and balances owed have the largest impact on your score. Credit is scored on a 300 to 850 scale. Credit scored from 300 to 629 is considered bad and credit in the 630 to 689 range is considered fair. What you want to aim for is anything from 690 to 850. Credit that falls between 690 and 719 is good and a credit score of 720 to 850 is best. 

Credit scores are primarily used to determine your creditworthiness. One way this can influence you is by determining whether you’ll get approved for a loan and what interest rate you will have to pay. The higher your credit score, the better rate you will get and the lower your payment will be. For example, according to NerdWallet, “Someone with FICO scores in the 620 range would pay $65,000 more on a $200,000 mortgage than someone with FICOs over 760.” That’s a lot of money you would have to pay just because you have a lower credit score.  

Your credit score can also influence your approval rate for many other things besides loans. It can determine if you get approved for a credit card and how much you get approved for. Property owners look at credit scores to decide who they want to rent to. Insurance premiums can also go up if your credit score is low. 

Checking your credit score is easy, and typically free. Most credit card providers allow you to check your credit score for free.  

Now that you know why your credit score matters, here are a few ways you can build it up. First, always pay your bills on time, and never miss a payment. One single missed payment can take over 100 points off your score.  

Another way is to apply for a credit card and regularly use it to make purchases. Using it and paying on time is an easy way to build your credit up. Just make sure you know the credit limit on the card and only spend what you can pay back when the bill comes. Paying your balances off in full is another way to build up credit.  

Some services like Experian Boost can help boost your credit score. You can report recurring payments such as utilities, rent, and even streaming services to the credit bureau for some extra credit. 

Keep in mind that identity theft can damage your credit score, so it’s important that you monitor your credit report to make sure that no one is using your credit or making any unauthorized purchases. You can get your credit report for free at NerdWallet or annualcreditreport.com.  

If there are any other tips or topics you’d like us to cover, let us know at tcupodcast@trianglecu.org and don't forget to like and follow our Making Money Personal FB page and look for our sponsor, Triangle Credit Union on Instagram and LinkedIn to share your thoughts.  

Thanks for listening to today’s Money Tip Tuesday and be sure to check out our other tips and episodes on the Making Money Personal podcast.  

Have a great day!