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What Teens Need to Know About Credit Scores

It’s no secret that women are generally better than men with finances. Due to the current gender wage gap reported on the World Economic Forum, they earn less — which means they need to budget their expenses more. Women tend to be more practical as well. As a result, TIME reports that women are also more strategic with credit cards than men. Women are more likely to open an account to build credit and earn more perks, while men are more likely to get a credit card to make big purchases.

Yet, according to the same article above it’s also more difficult for women to build credit compared to men. They’re even less successful in negotiating lower interest rates. Still, women shouldn’t back down from a challenge and we can take advantage of factors we can manipulate — such as our credit scores. After all, a high credit score is an irrefutable fact of good credit habits.

That said, here are simple tips and tricks you can use to improve yours.

What is a credit score?

Credit scores allow creditors to better assess your reliability when it comes to making payments on time. This determines whether they give you credit, under what terms, and on what interest. As such, it makes it easier for you to make bigger transactions — such as taking out a loan, renting a house, or getting better insurance rates. lists down factors that affect your credit score: outstanding balances, length of credit history, applications for new credit accounts, and variations in types of credit accounts. When raising your credit score and improving your track record in the eyes of creditors, it’s important to take all of these into account.

How to improve your credit score

Checking credit reports

Your credit report has information about your credit activity and current credit situation, including your loan payment history and the status of your credit accounts. It is important to review and understand your credit report regularly, and to make sure that the information is up-to-date and accurate. Singapore financial advice can help you with understanding your credit report and making sense of it.—But there are instances wherein your credit report might contain inaccurate information that will affect your credit score. This is why it’s good to check your credit report yearly, as you are entitled to review them for free every 12 months. This helps you detect potential errors, prevent identity theft or credit card fraud, and spot mistakes that might be hurting your score. It takes no longer than 10 minutes and can save you a lot of time and trouble later on if there is an issue.

Paying bills on time

Your payment history determines 35% of your credit score, which means that failing to pay your bills on time can compromise your credibility. Even missing a payment by 30 days can lower your credit score by as much as 100 points. One of AskMoney’s credit score tips for reversing a bad score is to stay on top of your bills. Simply paying your bills on time for 6 months can seriously improve your credit score. You can also take measures to avoid missing payments by setting up reminders or opting for auto-pay.

Reducing credit limit use

Credit utilization, which is your balance divided by your credit limit, is a part of the amount owed component that takes up 30% of your credit score. A lower balance will result in a lower credit utilization rate, which positively affects your credit score. Our article on the ‘Important Things to Keep In Mind When Managing Your Own Money’ explains that you should avoid building debt that you can’t handle. This is why it’s a good idea to spend only what you’re capable of paying.

Paying your bills in full

In line with your credit utilization and balance, there have been some contradicting opinions about whether you should pay your credit card bills in full or leave a balance. But financial educator Tiffany Aliche advises that your credit score will fare better by paying in full. Paying your bills in full not only improves your credit score but also saves you the time and trouble from catching up with your balance later on.

For women, having their financial security affected by the current gender wage gap should do little to impact their decision-making with money. Because while bad credit can be a huge disadvantage to your lifestyle and spending there are always ways to be resourceful about manipulating it, such as by raising your credit score.

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