The Importance of Credit Score Education!
“FICO ®“…” credit score”…” credit history”…” Transunion”…” Equifax” “…Experian”. These terms are essential in understanding your current and future creditworthiness, especially regarding large purchases like cars or homes.
That’s why credit score education is vital to the overall health of your finances! Luckily, there are many print and online free tools to help you understand the importance of understanding your credit score, obtaining and maintaining a good score.
Let’s review just a few of these quality resources available to you:
“So… What’s a Credit Score?”:
Since 1999, Investopedia.com has simplified financial information through education and resources on all things dealing with personal finance for us ordinary folks.
Here’s their description of a credit score:
“A credit score is a number between 300–850 that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, and repayment history, and other factors. Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner.
Key Takeaways:
· A credit score plays a key role in a lender’s decision to offer credit.
· The FICO ® scoring system is used by many financial institutions.
· Factors considered in credit scoring include repayment history, types of loans, length of credit history, and an individual’s total debt.
· One metric used in calculating a credit score is credit utilization or the percentage of available credit currently being used. · It is not always advisable to close a credit account that is not being used since doing so can lower a person’s credit score.”
“What’s a FICO ® Score?”
Glad you asked! Founded in 1956 by engineer Bill Fair and mathematician Earl Isaac, the Fair Isaac Corporation (“FICO ®“) created FICO ® Scores about thirty years ago, providing an industry-standard for scoring creditworthiness that was fair to both lenders and consumers.
According to their website, MyFICO.com states that:
“A FICO ® Score is a three-digit number based on the information in your credit reports. It helps lenders determine how likely you are to repay a loan. This score, in turn, affects how much you can borrow, how many months you have to repay, and how much it will cost (the interest rate). When you apply for credit, lenders need a fast and consistent way to decide whether or not to loan you money. In most cases, they’ll look at your FICO ® Scores.
You can think of a FICO Score as a summary of your credit report. It measures how long you’ve had credit, how much credit you have, how much of your available credit is being used, and if you’ve paid on time.” Not only does a FICO Score help lenders make smarter, quicker decisions about who they loan money to, it also allows people like you get fair and fast access to credit when you need it.”
The difference between a FICO ® Score and a credit score (a significant difference) is worth reading. I encourage you to review and use the educational materials on this site!
General Information About Credit and Credit Score Education:
A section in the U.S. Federal Trade Commission’s Office of Consumer Information online site called “Understanding Your Credit” provides a wealth of on-site tools and information, and other online resources for further credit and credit score education.
The section explains:
- What is your credit, and why does it matter?
- How do you know if your credit is good?
- How can you protect your credit?
Nerdwallet.com has an article that explains the importance of our credit scores. Also, review and use the various guides, tools, and other articles on their site!
Let’s not forget online and print books! Amazon.com has many hardcovers, paperback, audio, and e-books you can purchase. Under “books,” search under subjects such as “credit scores” and “credit ratings and repair.” You’ll find a large assortment of reading and audio material.
Also, don’t forget your local public library! Even during the pandemic, our public libraries have a WEALTH of books (many libraries have set up protocols to let you check out library material safely), e-books, tapes, online classes, and research databases virtually available to you for free!
Is There Credit Score Information Specifically for Millennials?
Many Millennials (adults age 23 to 38) are in dire financial straits due to large educational loans, credit card debt, and (as of the writing of this post) a current employment opportunity decrease due to the COVD-19 pandemic. However, they are very aware of their general lack of personal finance education and are eager to learn!
Experian.com, one of three major credit scoring companies (Transunion and Equifax are the other two), posted on its’ blog the post, “Why Credit Education Is Important for Millennials.” At the end of their blog post are similar posts geared towards millennial-specific education. I encourage you to read them!
My Credit Score and Financial Future
FINRA.org (The Financial Industry Regulatory Authority, Inc.) wrote an article entitled, “How Your Credit Score Impacts Your Financial Future”
They cover topics such as: how your credit score affects you, determining your credit score, what helps and hurts a credit score, and good credit puts money in your pocket.
These resources are just a few of the credit score educational tools available to you.
But this is a start! Educate yourself, and seek out professional guidance when it comes to your financial future. This is an essential step to financially abundant living!
For more information on personal finance, check out my other blog posts under “Financially Abundant Living”
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