Let's talk about your credit

Probably not the words you want to read at the moment. That’s because the big old system your credit currently falls under is pretty important, and pretty unfair. Either that or you have no clue why you should even care about your credit score so this seemed boring. Let’s tackle both.

Illustration of hands holding credit cards

Right now the system is broken, but we’re building something pretty exciting to fix it (as you probably know). So while we work on beating the banks, the lenders and the tax evaders, let's get you clued up on all things credit.

What is a Credit Score?

Think of it like a key that gets to decide which doors you can open (literally, it affects whether you get that new car, first house etc, but we’ll get to that).

It’s a score from 300-850, and ultimately measures how ‘trustworthy’ lenders think you are.

Why should you care?

It’s important.

A ‘bad’ credit score – anything under about 580 can make life harder.

You want to rent somewhere to live? Your landlord will want to see a credit report including your score to decide whether or not you’re reliable when it comes to paying rent on time. Buying? Let’s be honest, most of us are gonna need to be borrowing some money. You go to your lender, you ask them really, really nicely for a mortgage to help you get things moving, and again it’s up to them to decide whether or not you’re the perfect candidate for paying them back pronto, based on your score. Not how nicely you asked.

Then there’s that car you’ve been saving for. You’re not quite there and you need a little loan. Who gets to decide? The lender, and your credit score.

And let’s not even talk about potential employers using it as a measure of reliability.

That big helpless feeling in your stomach? It’s days are counted. We’ll keep you updated on the card that’s gonna change things. Until then, there are some things you can do to bump your score in the right direction.

How to improve your Credit Score:

Like most actually important things in life, there’s no overnight fix. But the sooner you start shifting your spending patterns, the better. By doing any of the below that you can, you could see an improvement within a month.

  • Use your bills. Sure, they suck, but pay them on time each month and they’ll help you seem all reliable.
  • DO: Use your credit card (for now, we’re coming with the exciting stuff very soon).
  • DON’T: Go over a 30% utilization ratio each month. In other words, try not to spend more than 30% of your credit card limit – $5,000 limit? You want to be spending 1,500. Show them who’s in control.
  • Debit cards are pretty useless when it comes to credit building. So do try and use a credit card as much as possible, but remember to stay within the 30%.
  • Pay your credit card off in full right before the due date. Paying off as soon as you spend anything doesn’t help your score.
  • Get as exclusive as possible with your loans. Applying for a load of them can damage your score – each time you apply, a lender will pull up your full credit report. This counts as a ‘hard check’ and each one of those hurts your credit score. Lenders can also see that you’ve been shopping around for loans and unfortunately, their MO isn’t to help the people who clearly need it.
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Understanding Your Credit Score: How Does this Junk Work Anyway?

Alright y'all, ready for some boring adult talk? No? Too bad, it’s important! On the real though, even though nobody really likes credit scores, we have to adhere to some unavoidable societal norms and everything and this is one of those very unavoidable ones. Understanding your credit score is by no means the easiest endeavour, but once you have a good handle on it, your financial life will be a lot easier. Today in the Cleo blog, we’ll break down how these scores work, what they’re used for, how they’re calculated, and how you can raise them. You ready to get this over with? Top off that coffee and let's do it to it.


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