This week's Wealth Coach Newsletter is about credit scores; what they are and how to boost them.

But first, if you want the shortened video explaining it all, check it out here:

https://www.youtube.com/watch?v=iSvEvf_Yzc0

If you want to read the full article, here it is!

Your credit score is a numerical representation of your creditworthiness, and it's used by lenders to assess the risk of lending to you. Several factors play into your credit score, and understanding them can help you make informed decisions to boost your credit score. The specific algorithms used to calculate credit scores may vary slightly among credit bureaus, but generally, the following factors play a significant role:

Payment History (35% of your score): This is the most critical factor. It reflects whether you've made payments on time for credit cards, loans, and other debts. Late payments, collections, bankruptcies, and defaults can negatively impact your score.
Credit Utilization (30% of your score): This is the ratio of your credit card balances to your credit limits. Keeping your credit card balances low relative to your limits can positively impact your score. Aim for a utilization rate below 30%.
Length of Credit History (15% of your score): The longer your credit history, the better. Lenders want to see a history of responsible credit use. Closing old credit accounts can reduce the length of your credit history, so be cautious when doing so.
Credit Mix (10% of your score): Having a diverse mix of credit accounts, such as credit cards, installment loans, and mortgages, can positively affect your credit score. It demonstrates your ability to handle different types of credit responsibly.
New Credit Inquiries (10% of your score): Every time you apply for new credit, a hard inquiry is recorded on your credit report. Too many inquiries in a short period can negatively impact your score, as it might indicate you're taking on too much debt.

To boost your credit score:

Pay Bills on Time: Make sure you pay all your bills, loans, and credit card payments on time. Even one late payment can have a negative impact.
Reduce Credit Card Balances: Aim to keep your credit card balances low, ideally below 30% of your credit limit. Paying down high balances can have a significant positive effect on your score.
Build a Positive Credit History: Keep old credit accounts open to maintain a longer credit history. If you're new to credit, consider getting a secured credit card or becoming an authorized user on someone else's credit card to start building a positive history.
Diversify Your Credit Mix: If you only have credit cards, consider adding an installment loan like a car loan or a personal loan to your credit mix.
Limit New Credit Inquiries: Be selective about applying for new credit. Multiple hard inquiries in a short period can harm your score. Apply for new credit only when necessary.
Monitor Your Credit Report: Regularly check your credit reports from all three major credit bureaus (Equifax, Experian, and TransUnion) for errors or inaccuracies and dispute any discrepancies.
Use Credit Responsibly: Demonstrate responsible credit use by paying attention to your credit utilization, making on-time payments, and managing your debts wisely.

Improving your credit score takes time, but with responsible financial habits and patience, you can gradually raise your score and improve your overall financial health.

Stay great,

The Wealth Coach

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