S1E6 | Credit Scores
“Having a good credit score basically means you’re a low risk person. That’s what it really boils down to. One of the larger reasons why we’re talking about this is because having a good credit score can add up to dollars and cents savings down the road.”
Credit scores are important, especially for younger listeners starting in their financial journey. Here to discuss how they work are Matt Stead, Financial Advisor, Eric Sachetta, CFP, and Emily Diezemann, Accountant.
Right now in America, the average credit score has reached a record high of 711, up from 706. The pandemic and government stimulus has affected people’s spending habits; people are now paying off debts and spending less out on the town, which has improved credit scores across the board. But as scores go up, a shocking 40% of Americans still have no idea how their credit score is determined or how to improve their score.
Payment history makes up 35% of credit score, so continuing to pay bills on time, keeping spending under 10% of the available credit, keeping credit cards open and active are all ways to help to build good credit. Opening too many new accounts within a short period of time can be a red flag for creditors. The best piece of advice here is to avoid carrying a balance on credit cards. These tips may help keep your score up, which helps banks identify you as a ‘low risk’ person. In the instance of buying your first home, credit scores determine your mortgage interest rate and a high score can keep your interest rates low, saving you thousands of dollars over the years.
We’re Here to Help
Improving your credit score can be scary, but there’s never been a better time to do it. If you have any questions, feel free to reach out to us at Sachetta Callahan.