One of the most popular questions I’ve received since starting this site has to do with building and maintaining a strong credit score. For all the jingles and commercials floating around the airspace, many young people haven’t learned the basics of credit scores—how they’re calculated, how to build strong ones, and why they matter. Next week’s article will discuss why credit scores matter; this week's article tackles the prior two questions.
Did you know that there is not one universal number referred to as your credit score? In fact, there are three different major credit bureaus in the United States, whose task is to assemble information relevant to your credit rating. That information can be pieced together in different ways, potentially resulting in vastly different credit scores depending on a specific score’s algorithm. Some lenders even have their own proprietary rating formulas, which they use to assess potential borrowers. With all of this confusion about credit scores, how can young people begin to make sense of their own credit level? Fortunately, there's a way.