Credit scores have become more critical in recent years. These scores determine more than the credit cards, loans, and rates for those that you can obtain. 

Ways that credit scores are being used:

A credit score can hinder or help you. A high score can be leveraged to get great deals on credit cards, mortgages, insurance, and cell phones, while a bad score can prevent you from receiving these or paying much more.  

The cost of a mediocre or lousy score is high. According to Informa Research Services, over the life of a $200,000 mortgage, someone with a FICO score in the range of 620 would pay $65,000 more than a borrower with a score over 760. Likewise, on an auto loan of $30,000, the borrower with the lower score would be paying $5,100 more for their vehicle. And, for a 15-year home equity loan, the borrower with a higher score would be paying a total of $22,500 less.  

These three loans combined mean a difference of $92,600. With the median weekly earnings for an employee in 2022 of $1,070, a worker with a lower credit score will be working nearly 87 weeks more to pay for these loans.  

Because your credit score is such an integral part of your financial life, it pays to keep track of it and understand how your actions can affect it.  

Building a great FICO score

Your FICO score can range from 300 to 850, and there are six factors that are used to create your score. The two most important factors, which combined comprise 65 percent of your total score, are Payment History and Amounts Owed.  

Payment History- makes up 35% of your score, and if you at least pay the minimum for every account, then you will be perfect for this section. This score goes down significantly for every late payment you make, and the late payment stays on your report for seven years, so don’t forget to pay on time.  

Amounts Owed- makes up 30% of your score and is related to your total amount of credit available versus the amount you use (AKA your utilization). If you have $100,000 in total credit available and have a balance of $10,000, you have 10% utilization. If you have $1,000 in credit available and a balance of $100, you also have 10% utilization. You want your total utilization to be below 10% for the best Amounts Owed score. As your utilization rises above 10%, your score will go down. You can pay off your loans and credit cards to increase your Amounts Used score.  

No matter your age or income level, you can build and maintain a great credit profile through credit management, giving you access to all the benefits a high credit score provides.