The Score That Really Matters

While your SAT, GRE, GMAT, MCAT, or LSAT scores will cease to matter once you have graduated from college or graduate school, there is one score out there that will follow you the rest of your life: your FICO credit score.  This number is used by various parties,  from prospective landlords and employers to institutional lenders to insurance agencies, to determine your credit riskiness.  A higher score (850 is the maximum) shows that you are fiscally responsible, making you less likely to default on monthly payments.  This translates into lower interest rates and a higher credit line, and may mean you don’t have to give as much in security deposit or down payment.  Most people don’t go past 800, so any score above 750 is generally considered to be pretty good.

Your FICO credit score is calculated by weighing different types of credit data, such as payment history, amounts owed, length of credit history, number of recently opened accounts, and types of credit used.  Therefore, some of the easiest ways to improve your credit score is to pay your bills on time (even if just the minimum), lower the ratio of your outstanding debit to your credit limits, try to keep an older credit card active by using it to make a purchase every so often (even if the credit card doesn’t provide much rewards), and not open new credit cards that you don’t need.

Unfortunately, your credit report does not come with the score for free.  The best way to get your credit score is through www.myfico.com.  For $16, it will give you your credit score, tell you whether it is good or bad, and simulate how it may change.  And you should try to purchase your score from all three credit bureaus (Experian, Equifax, and TransUnion) at least once, since each bureau calculates the score slightly different.

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