I'm looking to get a credit card, such as American express credit cards, we all know that. I don't have the greatest credit as I am young and am only 20 years old. And I've also never had a credit card. However, I am definitely looking to know all about credit cards and credit scores so that I can be ready for my financial future.
There are many positives of a good credit score, such as being approved for an apartment, a home a car and so on.
Low-interest rates are directly related to a high credit score. Who wants to pay more in interest than they have to? A high credit score and a low credit score can equal extra costs related to a high-interest rate in the hundreds or thousands. By having a high credit score, you can then use credit to your advantage, instead of your disadvantage.
The credit scoring model weighs certain factors more heavily than others, such as payment history and the amount of debt that you owe.
Payment history: (35%) – Your payment history includes your account payment information, which includes any late payments that were reported. Be sure to pay at least the minimum amount (and strive for much higher than that) and always pay on time. This is a big factor when computing your credit score.
Amounts owed/Debt: (30%) – Amounts owed is how much you owe on your various different financial accounts and the amount that you have utilized. The amount of available credit you're using on revolving accounts is a big factor when computing your credit score. Try to keep your utilization rates low. If your credit limit is for $1,000, try not to utilize over $300 of your credit score.
The length of your credit history: (15%) – Length of credit history is how long you have had certain accounts. Older accounts can benefit your credit score as it shows stability and responsibility.
Types of credit used: (10%) – Types of credit used is the mix of accounts that you have. Do you have credit cards, mortgages, car loan, student loans or something else?
Age of credit: (10%) – Age of credit includes how old or new your credit accounts are, including credit inquiries and the number of recently opened accounts.
Do you know what's dragging down your credit score?