Credit Score [OYF #7]

The last thing you’re going to do this week is checking your credit score!

Before we do the actual checking, I want to give you some information about credit scores and why they’re important.

This is just a simple overview of credit scores – I’ll get more specific about credit scores in another post.

Why Knowing Your Credit Score is Important

Just like net worth, your credit score is another way you gauge your financial health (especially when it comes to paying off debt).

Having a good score means you can get better rates on loans (like mortgages)! Some employers will even pull your credit score!

What Determines Your Credit Score

According to FICO (the company that created an industry standard credit score), credit scores are made up of:

  • 35% Payment History (do you pay your bills on time?)
  • 30% Amount Owed (Do you max out your credit cards?)
  • 15% Length of History (How long have your accounts been around?)
  • 10% Credit Mix (Do you only have credit cards or do you also have loans?)
  • 10% New Credit (Did you open a bunch of new credit cards recently?)

Where to Check Your Credit Score for Free 

There is a website called Credit Karma that lets you check your credit score for free! All you need to do is go to Credit Karma and signup!

Besides being able to check your credit score for free each month, Credit Karma also offers free credit monitoring and will alert you if something seems odd (like a new credit card was opened).

When you check your score on Credit Karma you should see a number (between 300 and 850). That’s your credit score.

What the Number Means

You want your score to be as close to 850 as possible. The higher the score, the better changes you have of getting approved for things, and the better your rates will be (on loans).

Don’t panic if you score isn’t “good” or “excellent” – there are things you can do to improve it!
It’s just good to know where you stand right now.

What’s next?

So you picked a day for managing your finances, decluttered your bills, found out how much you owe, calculated your net worth, and checked your credit score! Pretty eventful 7 days! 

Congrats on getting through it all!

I hope this really helped you get things organized and helped you figure out where you stand financially!

If you want to find out what the next steps are, it’s budgeting and getting an emergency fund together.

You can check out the Roadmap to Financial Freedom to see a bird’s eye view of the entire thing.