What are the three things that scare Americans the most? Snakes, Clowns, and their Credit Score. Next to these three terrifying nightmares, almost everything else is easy to handle.
Much like the boogeyman, the dreaded credit score hides in the shadows, inspiring fear and panic. The long shadow of this evil creation hangs over all of us like the sword of Damocles, dangerous and unknowable.
How Credit Score is Determined
Have you ever wanted to know how they come up with this number? Sure, we all know it’s insanely complicated, but that’s because they don’t WANT you to understand it. The credit companies believe we are happier not knowing. And maybe they’re right.
But to break it down into its simplest terms, here are the criteria used to judge your credit:
- 30% is based on how much you owe. If you owe more than 30% of your credit limit, it will kill your score.
- 35% comes from your payment history. Do you pay on time? Do you miss payments, or don’t pay enough? This is the single most important aspect of the credit rating.
- 15% of the credit score is based on how long you have had credit. The longer you have been borrowing or using credit cards, the better it is for you.
- 10% is new credit. You need to always be borrowing to keep your score fresh.
- And the last 10% of your score is your Credit Mix. No, that isn’t an incredibly boring mix tape, it’s what different kinds of credit and borrowing you are involved with. The better the mix, the better your score
- Now that you know, does it make anything clearer? Or is it just as incomprehensible as before?
In any event, you now understand that calculating your score is something that you cannot do yourself. This is how the credit companies maintain their power over our finances!
Thankfully there are options outside of the Big Banks and their credit score oppression.
Because the bottom line is that credit score matters most to people who cannot buy what they want. And then they need to borrow money to buy these things. People who work hard, pay their bills, and live within their means can go for their entire adult lives without needing to spend money they don’t have. When it comes to buying a house, or a car, almost everyone needs to borrow. And this is the trap of the credit score.
But in terms of living your life, and meeting your financial obligations, you can do all of these things regardless of your credit score.
And if times get tough, and you do need to borrow a little money here or there, there are loans not based on your credit score. Online installment loans are not based on your score. In fact, these lenders don’t even check your score. If you have a steady income and a bank account, you can easily qualify for a few hundred bucks. And you never have to fuss with the big banks at all.