Your credit score is like your adult report card. If you have followed all the rules and made wise financial choices you have a high score. If you have been behind, over extended yourself and missed a payment you are dinged and your score is reduced. Do you know your credit score? What would your adult report card say?

What is a credit score?
Your credit score is a three-digit number that indicates your overall credit worthiness. The score is derived from a mathematical equation taking into if you have paid your bills timely, how much credit you already have and the likelihood that you will meet your future credit obligations. Three major institutions, Experian, TransUnion and Equifax report credit scores and you are able to get a copy of your credit report each for free each year from one.

Why is it important?
In addition to ensuring you get a competitive rate for car loans and mortgages, many companies are now including a credit review as part of the hiring process. Employers that require security clearance and money management may use your credit score to eliminate you from the job pool. A high credit score also shows some level of organization which is important for many roles. Remember a credit score is not determined by how much money you make, but how you handle your money.

How do you improve your credit score?
The easiest way to improve your credit score is pay your bills on time. So easy, right? Spending the time to set up automatic payments will ensure your bills are paid timely. You might also thinking closing down credits cards after you have paid the debt off might be a good idea. Actually, no. By closing the cards you are decreasing the total amount of credit available to you which will reduce your score. Just put those paid off cards in a drawer and keep them safe.

Some organization claim to “repair your credit.” Be exceptionally careful, as your mother always said, “if it’s too good to be true, it probably is.” These types of companies have more complaints with the Better Business Bureau’s than any others. Most times what these companies do is help you consolidate your debt into a single debt, but nothing beyond paying your bills on time going forward can “repair” your credit.

Continue the conversation about credit with Julia Lorenz-Olson of the Art of Finance