Updated: Feb 18, 2019
If you were anywhere other than under a rock in 2017, chances are, you’ve heard some reference, in one way or another to the line quoted above by Jay Z, from a song on his "4:44" album.
Whether you’re familiar with this highly used hip hop quotable or not, I think it’s worth noting that Jay Z is not only known as one of the greatest rappers of all time, or Mr. Beyoncé, or co-founder of Roc-A-Fella records. Sean Carter also happens to be one of the most famous “rags to riches” (relatively speaking) stories known to this generation. He's not a business man....he's a business...man!
You might be asking yourself what this has to do with credit scores, credit reports, and anything else credit related. Well, imagine growing up in the Marcy housing projects in the 80’s, in Brooklyn New York, where many families struggled with worrying about where their next meal was coming from.
There probably was little to no room for being concerned about learning what the components of “good credit” consisted of. A lot of people living in these conditions were forced to be concerned more with the necessities of survival over anything else. So, I think it’s safe to say that if anyone has seen both sides of the coin of living in a world where #credit is everything, and also living in a world where the ins and outs of credit was essentially a foreign concept, I’d put my money on Jay Z.
This man is a nearly a billionaire and has built an empire that likely surpasses the conceivable realities of many who currently live in, or come from similar conditions as him.
As impressive as his resume is though, he has blatantly admitted that much of it would not be possible without having #goodcredit.
It doesn’t matter if you’re the next billionaire hip hop mogul, or fresh out of school and now entering adulthood; if you think that the magic number that follows you around, which Experian, TransUnion and Equifax have been so kind to calculate for you, then you might want to go complain to whatever school district was responsible for your formal education, and ask them why they haven’t better prepared you for “the real world”.
Let’s go through a simple breakdown of what goes into determining that oh so important three-digit number that can have an effect on so many things like: buying a home, a car, starting a business, or even getting specific jobs.
There are five components of credit that compiles your total credit score.
Payment History: 35% of your score
- How often are you paying your bills on time? One late payment can decrease your score drastically. This includes any payment on any account that report to the credit bureau.
Amount owed on your debt: 30% of your score
- This pertains to your utilization rate, which is the effect of the current debt you owe in comparison to your spending limit on your revolving credit account.
Length of credit history: 15% of your score
⁃ The length of credit history is where things can get a bit tricky for those who are just starting out on their financial wellness journey. The longer you have had credit the more positively it will impact your score. If you are starting off with zero credit, only time will help in this component.
Inquiries: 10% of your score
⁃ It is helpful to know that generally speaking, your credit score is impacted anytime a third party makes an inquiry on your credit. This may come in the form of background checks, credit checks, credit card application submissions, and many other activities that would result in someone inquiring information about your financial status as it relates to debt and borrowing.
Types of Credit (credit mix): 10% of your score
- Last, but not least, the different types of credit that you have on your credit history has an impact on your score. A healthy mix of different types of credit accounts, such as car loans and credit cards, reporting positively can show that you are responsibly managing your finances.
Your credit score can either make you or break you in many regards, and we want to see you thrive. So, don't take your number lightly, and allow us educate you on what you can do to help yourself out!