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Your credit score, or the number between 300 and 850 that lenders use to gauge your credit riskiness vs. trustworthiness, is invisible. You probably forget about it on a day-to-day basis, and it certainly doesn’t define you. But your credit score does affect your financial life in a big way—one that can extend into the rest of your life, too.

At some point, many of us wonder: How important is my credit score, anyway? Keep reading to learn more about how your credit score can affect your life, and which factors contribute to your rating.

How Credit Score Can Impact Your Life

You can generally get along in the world without monitoring your credit score too closely. You probably won’t be asked about your rating on a first date. We don’t walk around wearing our scores on our sleeves; it’s a private rating that’s between you and the credit rating agencies assigning it.

But when you go to apply for something—be it an apartment, an insurance policy, or a job—suddenly your credit score matters. And that’s why it’s so important to understand it before it’s under scrutiny.

The Motley Fool outlines some “sneaky” situations in which your credit score affects your life, including:

  • Auto insurance rates: Out of 50 states, 47 use credit score in setting your policy premiums. The higher your score, the more money you’ll save.
  • Rental applications: Your credit score affects your ability to secure a mortgage and your chances of getting approved for a rental home/apartment. A low score may also hike up your deposit.
  • Utilities: Utility companies use credit rating to assess risk. A low score may hike up your deposit here, too.
  • Mobile phone plans: If your credit score makes you a risk, cellular carriers may ask for a deposit before enrolling you.
  • Employment offers: When you’re a candidate for certain jobs, your potential employer may access a modified version of your credit report.

It’s clear from these examples that a lower credit score tends to be more expensive and can even inhibit people from getting approval in certain areas. Maintaining a higher score can help consumers save money and receive approval for major purchases or hiring because it conveys overall financial responsibility. In other words, your credit score inevitably speaks volumes about you, so it’s something to take seriously if you want to make a solid first impression on paper.

Know the Factors Affecting Your Credit Score

To improve your credit score, it’s important to know what goes into its calculation.

Your payment history makes up 35 percent of your score. Late or missed payments leading to delinquent debt will drag down your score, as will repossession or bankruptcy on your record. Before giving up on paying your debts or filing for bankruptcy, consider other debt relief options to get your finances back on track. Debt settlement programs and services like Freedom Debt Relief can help certain consumers pay off delinquent debt for less, but be aware it will take years to do so successfully—there are no instant solutions for eliminating debt or raising your credit score!

Unsurprisingly, your debt level makes up the next biggest proportion of your credit score: 30 percent. The total amount of debt you carry compared to the total amount you can carry, called your credit utilization ratio, comes into play here. Ideally, you’ll only ever use around 30 percent of the maximum credit you can carry.

The length of your credit history matters, making up 15 percent of your score. Credit ratings factor in your oldest account and the average age of your accounts.

About 10 percent of your credit score looks at the types of credit you have. A mix of assets is usually healthiest. Another 10 percent of your score looks at how many times you’ve applied for credit—especially within a short period of time.

Spoiler alert: Your credit score is quite important. Understand the factors so you can do all you can to raise your score and reap the rewards.


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