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Unlock the Power of Your Credit Score in 2024

A credit score might seem like a mysterious three-digit number, but it holds significant influence over your financial life. Whether you're applying for a loan or a credit card, renting an apartment, or even setting up utilities, your credit score plays a crucial role in the decisions that lenders, landlords, and service providers make. As we look forward to the beginning of 2024, you can get a head start on a resolution to be more financially fit in the new year by learning about credit scores and what you can do to make a positive impact on yours. 

What Is a Credit Score? 

Simply put, a credit score is like a grade for how good you are at managing money. It is one of the most important tools that lenders and financial institutions use to assess the risk of lending money to you. A higher credit score indicates a healthy credit history, therefore, a lower credit risk, making you more appealing to potential creditors. Credit scores typically range from 300 to 850, with higher scores being better, indicating that you have consistently made payments on time to satisfy your credit obligations. While a "good" credit score varies based on the lender and the specifics of the loan request, it is typically around 700 or higher. Once your score is over 760, you may expect to be offered the best available rates. Credit agencies refresh scores once a month, but the exact timing of those updates may vary based on a myriad of factors.

How Is a Credit Score Calculated? 

You might be surprised to learn that you can have multiple different credit scores at the same time. Based on where the lender obtained their data (from one, two, or all three credit reporting agencies), the credit score model that is used, the lenders own criteria for issuing credit, and the timing of when the score was produced. A hypothetical scenario for calculating a credit score might weigh the following factors this way:

Lenders will also look at other factors, such as your income, your assets, or how long you have been at your current job. Note that a high credit score isn’t the only sign of financial health. An individual who chooses to use cash or debit cards for major purchases rather than taking out loans will likely have a lower credit score than someone with a long record of multiple well-managed debts, even though they may be very financially responsible. 

 Why Does Your Credit Score Matter? 

Resolve to Improve Your Credit Score Using These 10 Tips

Build a Credit Score Without Debt

Young adults and those who have never had a need for credit may not want to go into debt but want to build their credit score. Here are a couple of ways that you can build your credit score without debt.

With a Better Credit Score, Be Proactive to Save Money

Once you’ve put in the work to get your credit score above 700, you can turn your attention to becoming more financially fit. Investigate whether refinancing your mortgage at a lower rate could save you money, while being mindful of closing costs or other fees. At renewal time, ask your auto and home insurance provider to re-run your rates, and consider shopping around with other insurers. Lenders, landlords, and insurers want to do business with people with excellent credit, so they will be competing for your business and offering you better deals. 

Saving for the Future.

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