Before I begin, I am not a credit expert. I’ve just been in a position having to teach myself about credit, and the implications of not taking care of your credit score.
Everyone has a credit score. It’s probably one of the most important scores you will have. It influences your power to buy a car, finance a house, and even get jobs. It’s important to know how to build a good score and keep it.
The first thing to know is that there are two different versions of credit scores, Fico and Vantage. A lot of creditors look at your FICO score versus your Vantage, but it’s important to keep tabs on both. With Fico, you’ll have three different reporting agencies, Experian, Equifax, and Transunion. All three scores tend to vary based on the criteria the agency uses.
One thing you’ve probably heard is to stay away from credit cards. Credit cards are not bad, when used appropriately. A good rule of thumb when you have credit cards is to keep it under 30% for utilization. If you have a card that has a $1000 limit, keep it at $300 or below. Ideally, it’s best to have a very small balance or not carry a balance month to month. Have a credit card for emergencies and make a small purchase to keep it open (like buy a pack of gum) and then pay it off. It will show a positive payment history.
It’s very important to never miss a payment because it can take up to 7 years to fall off. Even if it’s just the minimum payment, make a payment. It can be difficult to recover from a missed payment until it falls off.
The bottom line is, be responsible. If you don’t need to charge your credit card, don’t. Just charge enough to keep it open and make the payments on time.
To keep tabs on your credit score, look at Credit Karma and myFico. Credit Karma is free and will show you your Vantage score, and myFico has different versions (free and a membership plan) that will show you your Fico score.