Credit Scores and You

Your credit score is much more than a catchy song by a band you never heard of or a commercial jingle. Your credit score is probably the most important test score you'll be affected by through out your whole life. It's similar to the SAT's, though, in that you get points for every positive thing you do and for every negative thing that you do you'll lose points. Those with the best sore have the most options available to them. But rather than colleges or fancy Ivy League prep schools, here it's your life that this test prepares you for - or prepares everyone else for you. However you look at it.

Having a strong credit score can open up more doorways for you in through life. Sort of like how with a 1600 on the SAT's you can pretty much choose your destination. An average credit score ranges between 400 to 850 points. A comparatively average score on the SAT's and, well, let's just say you're staying local.

A number of factors can affect your overall credit score either positively or negatively. Just like it's important to study, cram and do your homework, always pay attention to your tutor when you're studying for the SAT's, it's important to have an understanding of what factors contribute to how your credit score is determined. Otherwise it would be like going into the SAT's still thinking they have a ton of analogies to work through - yeah that part's been taken off now, in case you didn't know. And there's a writing element.

Paying all your bills on time each and every month; not leaving a large outstanding balance; following the rule of charging only what you can afford to pay back when your statement arrives. These are things that earn you bonus points on your credit score. That'll move you up through the ranks pretty quickly. Only using 25% of your available credit is a great strategy. Sort of like studying only in 20 minute sessions will keep you fresh. Exhausting your credit limit within the first few weeks of owning the card will burn you out pretty quickly - like all night study sessions. To lenders that's a really bad sign. Over extending yourself is an indication to a lender that chances are you're not going to be able to keep up with your payments.

Late payments and missing monthly payments. It has been said that slow pay is better than no pay, but as a rule missing payments - that's a no-no. That's like walking into the exam room ten minutes late or worse, sleeping through it. You paid to get in that exam room - now you're going to have to pay all over again to get in on the next opportunity. And likewise, with late payments and missed payments, now you'll find yourself in a tight spot when it's clear that your payment is going to be late or missed. Banks and credit card issuers can charge  fees for late or missed payments. Get your lender on the phone and communicate with your issuing company right away. Communication is always the key if your going to be late.

And just like the days leading up to the SAT - all the years of study of the courses of your chosen career can be your success on test day, so too will your financial preparation and handling of money and credit reflect your credit score. If you've ever filed for bankruptcy, for instance, it's like starting from scratch. Companies will be able to see that you had problems meeting previous financial obligations by looking at your credit report. Just like when you apply to colleges, they look at more than just your SAT's...

The SAT is that test that sort of works to link two stages in our lives - high school and on to college. Your credit score, on the other hand is a different kind of score earned over your lifetime from the time you start to seriously enjoy your own money. Use it wisely - especially when it's loaned to you.