Credit Scores: Separating Fact from Fiction
This week we’re talking about credit scores. A single number that is supposed to summarize all of the information in your credit report, which itself tries to summarize your ability and willingness to repay debt. It’s imperfect to be sure; but for people who want to buy a home, or a car, or even rent an apartment that one number can mean the difference between a “yes” and a “no”.
The number one thing you can do to improve your credit score (or keep it high) is to make payments on time, every time. Payment history makes up the largest portion (about 35%) of your FICO credit score. A late payment on a credit card or auto loan can meaningfully drop your credit score and stays on your credit history for seven years.
You shouldn’t obsess over your credit score, but it is important to know how they work and how you can make the system work for you. Following bad advice (like the myth that you should keep a balance on your card for better credit) can hurt your score and cost you real money. You can get the full story on credit scores here.