In school, we get graded all the time. Let’s say if we habitually turn in our homework for Social Science late, we know we are unlikely to get an A+ on the subject.
Guess what? Grades matter too even after we put our school years behind us. They could come in a variety of shapes and dimensions. One such grade, our credit score, looms over pretty much the entire span of our adulthood. It grades us on how good or bad we have been at handling our financial affairs.
Credit score is also known as the FICO score, named after the namesake of the company who first introduced it in 1989. It has since been adopted as the score of choice by most of the entities we deal with. Entity? Whatever does that mean?
Looking to apply for a new credit card so we can get the 100,000 bonus airline miles as promised?
Looking to buy a car?
Looking for a place to rent?
Looking for a job?
Looking for personal loans for a home improvement project?
These are just a few examples of how an “entity” – a credit card company, an auto loan company, a landlord, a potential employer, or a personal loan company – can pull our credit score. They need our permission, of course. But who can really afford to say no?
In its core, credit score aims to stitch together a concise, digestible view to help each “entity” make a snap decision on us based on how trustworthy we appear to be. Unlike the letter grades we got when we were students, credit score is a number ranging from 300 to 850. A value of 670 is typically considered good, and 850 is the perfect mark.
Since credit score has tendrils extending deep into many aspects of our lives, it’s crucial to understand our standing. Every American is entitled to get a free copy of their credit report once a year, which includes their credit score. If it is below 670, rest assured that it can get better. Living within our means and paying our bills promptly without delay are two surefire ways to move our credit score toward the right direction and keep it in a favorable position.
