Investing For Beginners | Explaining My Teenager How To Get 800 Credit Score
Explaining to My 13 yo Teenager How To Perfect Credit Score and how it can help her to make more money.
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00:00 – Why should you care about the credit score?
02:25 – What if you do not have a credit score? How can you build your credit rate?
03:48 – What things can ruin your credit score?
07:30 – Who decides what credit score you will have?
Is it possible to build a good credit score from zero to 800? What factors influence it? What kind of rating can you have? Which rules do you need to follow to get an exceptional credit score? Why do you need to pay attention to your rating and what benefits it may get you?
A credit score is a three-digit number that summarizes your credit risk, based on your credit data. The most common credit score is the FICO score, which is calculated using five main categories:
– Payment History (which influences 35%). Whether you’ve paid your past bills on time
– Amounts Owed (which influence 30%). How much credit and how many loans you’re using
– Length of Credit History (which influences 15%). How long you’ve had credit
– Credit Mix (which influences 10%). The types of credit you’ve had (e.g., mortgage, auto loan, credit cards)
– New Credit (which influences 10%). Frequency of credit inquiries and new account openings
FICO scores are based on a range of information on your credit report, but they don’t consider your age, education, employment history, gender, income, marital status or race.
Credit scores generally range from 300 to 850.
There are clear rules to follow if you want to build your rating
1. Pay everything on time. Your payment history accounts for the largest portion of your credit score. The more on-time payments you have on your credit report, the better it is for your credit score.
2. Keep your credit card balances very low. Generally speaking, keeping your balances below 30% of the credit limit is best for your credit score. So, if your card limit is $10,000, you’d want your balance to stay below $3,000. If you want to reach and maintain an 800 credit score, aim to keep your credit card balances even lower than that amount.
3. Avoid too many credit inquiries. Each time you make an application that requires a credit check, a hard inquiry is placed on your credit report. These hard inquiries are about 10% of your credit score. It’s not a large amount, but it can be the difference between an 800 and a 780 depending on the other information on your credit report. When you’re ready to apply for a credit card or a loan, do your homework ahead of time so you can apply just once and avoid multiple credit inquiries.
4. Monitor your credit and act quickly to clear up errors. Your credit score is based on the information in your credit report at any given time. That means you can lose your excellent credit score if there are significant changes to your credit report, particularly errors. Keep an eye on your credit information by using free and paid resources—CreditKarma.com, CreditSesame.com, WalletHub.com, AnnualCreditReport.com, and myFICO.com. If you spot errors, use the credit report dispute process to clear them up right away.
5. Let negative information age off your credit report. You may have a hard time achieving an 800 credit score with late payments or other negative items on your credit report. Fortunately, most types of negative information will fall off your credit report after seven years. If you can’t remove negative items because they’re accurate, be patient and keep paying for everything else on time.
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*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partner websites. The video is accurate as of the posting date but may not be accurate in the future.