Credit: This one word sends so many people into a panic, and for good reason. Your credit score is a number that defines your life almost as much as your social security number. But what is credit? Do you know your credit score? Do you even have a credit score? What’s a good score? This is a girl’s ultimate guide to improving her credit score, in six steps. 

Start by figuring out your credit score 

If you’ve never taken out any loans or used a credit card, you may not have a credit score yet. Or, if you’re like me, you might have a handful of student loans that you haven’t made payments on yet, and that’s the only thing appearing on your credit. If this is the case, you likely won’t have a very high credit score, and you’ll basically be building from scratch. I use Credit Karma to check in on my credit score frequently.

Credit scores range from a low of 300 to a high of 900. The national average is a 680, however, studies from the three major credit bureaus show that the rising generation, Gen Z, have much higher credit scores than their counterparts. 

The scores are grouped into four ratings, that help lenders decide if they want to give you a loan, and what interest rate to give you. 

Poor- 300 to about 650

Fair- 650-700

Good- 700-750

Excellent: 750+

Establish why your score is where it is

After you’ve figured out your credit score, it’s time to figure out what that means. There are several different factors that play into your score. Some of these factors are:

    • How many accounts you have open: The more accounts, the better–this shows lenders that you have a variety of types of debt and that you’re able to responsibly juggle a number of different types of loans. 

    • Payment History: This shows how frequently you are late on or missed payments. Every time you’re late on a payment, your credit score will take a hit. 

    • Derogatory Marks: Bankruptcies, liens, etc placed on any of your accounts. A derogatory mark will cause your score to plummet. You can avoid derogatory marks by making all your payments on time and in full. 

    • Credit Card Use: Credit card usage measures the percentage of your total credit limit that you carry from month to month. It is recommended that you carry less than 10% of your credit line each month. For example, if you have a credit limit of $5,000, you should not carry a balance of more than $500 each month. The lower your credit card usage, the better your credit score will be. 

    • Credit Age: This one is pretty much entirely out of your hands. The only thing you can do to improve this factor is wait. Having an older credit age shows lenders that you have been responsible with loans for a longer period of time. 

    • Hard Inquiries: Hard inquiries happen when you apply for a new credit card or loan. If you’re applying for something small, like a credit card, it will usually only take one inquiry, but if you’re applying for something larger, like an auto loan or a mortgage, they will usually have to check your credit several times. Your credit score will initially take a hit, but after a year or so, this inquiry will drop off of your score, so it’s nothing to freak out about. 

Learn the different types of scores

There are three different credit bureaus: Equifax, Experian, and TransUnion, and two different scoring models: FICO and VantageScore. Each of these scores will vary slightly and different lenders look at different scores so it’s important to pay equal attention to all of them. 

Obtain a credit card to start strengthening your credit

Now that you understand where your credit score comes from and how it works, it’s time to finally start building your credit. Start by obtaining a credit card. Check out this article to learn more about some of the best credit cards. Because you don’t have a credit score, or your credit score is low, they will start you off with a low credit line. Your credit line is the amount of money you’re able to put on the card before it is “maxed out.” For every quarter of a year that you responsibly make payments, your credit card company will raise your credit line. Remember, your credit score is based heavily on credit card usage, so you don’t want to max your card out every month. It’s best to stay below 10% usage each month. As your credit card company continues to raise your credit line, your credit score will also go up–usually only a few points at a time. Don’t get discouraged, a point or two every month will really start to add up, and soon you’ll see a score in the 700s or even 800s.

Stay on top of payments

Now that you’ve started to build credit, it’s important to stay on top of your monthly payments. If your credit card is your only loan, this should be easy. But once you introduce student loans, auto loans, or even a mortgage, it can be a lot more to juggle. An easy way to make sure you never miss a payment is by setting up auto-pay on any accounts that have the option. Making the minimum payment is necessary, but it’s always a good idea to pay a little bit more than the minimum payment if you can. 

Never stop researching

Continue to watch videos, read books, etc as you work towards your financial goals. There is so much information out there. No two financial advisors will offer identical advice or have the exact same ideas about the best methods to managing money. 

Now that you’ve got the basics down, it’s time to dig for information, practice healthy money management and figure out what works best for you. 

Georgia G

Georgia Gallagher graduated from the University of Alabama in the summer of 2019 where she majored in Journalism and Political Science. She is currently working as a Cast Member at  Walt Disney World in Florida. In her free time she can be found advocating for pro-life policies and working with single or low-income mothers. She often says that her planner is second only to her Bible and she’s never caught without a cup of coffee in her hand.