(Photo: Brightest Young Things)
Do you have credit cards? Do you have a car? Do you have a house? How about this one, do you have student loans? If you’re answer is yes to any of these, then keep reading.
When you have any of the above, it’s going to factor into what is known as a credit score. Student loans are probably the heaviest burden of them all, so check out this article on how student loans affect your credit score.
Since learning about financial stuff is really boring, I decided to breakdown your credit by way of songs that you may or may not have heard of. Even if this doesn’t help you understand your credit score, you’ll at least have a dope playlist to listen to next time you’re walking between classes or on your lunch break.
Here is Your Credit Score Explained in 5 Songs:
1. “Bills, Bills, Bills” – Destiny’s Child
So back when Bey was still the lead singer in Destiny’s Child, a topic they stress was bills. Does this sound familiar…
Can you pay my bills?
Can you pay my telephone bills?
Do you pay my automo’ bills?
Of course it does!
Well, did you know that 35% of your credit score is based on your payment history? That means that the more you don’t pay your credit card or other loan bills on time, you’re score is going to take hit. So how do you overcome this?
Negotiate with your lender for a lower payment, pay the minimum (something is better than nothing), or set up your payment to be automatic so you don’t have to worry missing another one. With the largest portion of your credit being due to payment history, you definitely want to make sure you don’t miss payment.
2. “Got Your Money” - ODB
Rest in Paradise to a hip-hop legend, Ol’ Dirty Bastard, who was a member of the Wu-Tang Clan. Just like C.ash R.ules E.verything A.round M.e (cream get the money), the amounts you still owe rule another large chunk of your credit score.
A whopping 30% of your credit score is based on the amounts you owe. That means that over half of your score is based on paying your minimum payment on time and how much you still have left to pay. If you’re going to get two of the five components of your credit score in check, these first two areas should be at the top of your list.
Consider a debt snowball or debt avalanche to start paying your balances down. There’s nothing wrong with having credit, just don’t over extend yourself. Try to keep you overall balance at one-third or less your total line of credit on credit cards.
You can even call creditors and as them to forgive a portion of your balance if you make a lump sum payment to rid the debt completely. Just tell them…
Hey, Dirty, baby I got your money
Don’t you worry, I say hey! Baby, I got your money.
3. “Back in the Day” - Ahmad
Back in the days when I was young, I’m not a kid anymore,
But some days I sit and wish a I was a kid again.
When you turn 18 you’re either going to start getting credit cards to sign up for in the mail, or the companies will meet you on campus at your school and tell you, “Hey! Buy now, pay later.”
Now, once you hit your mid to late 20’s or later, it’s all about making sure your credit is in good standing. Well, to do that, your credit history back to 18 years old is going to be a factor.
Things like how long you’ve had a card with a particular company and how well you managed that card’s balance over time make up 15% of your credit score. The longer you’ve had credit, the longer you’ve had to make it work in your favor.
It’s harder to get a good rate on a car or home loan with no prior credit history than if you previously had some type of credit showing you’re a good with money.
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4. “Credit” – Ty Dolla $ign
Whenever you do a project for school or work, you always want the credit you deserve. You put in hard work to get your final results and nobody should downgrade your efforts. You feel you put a new spin on whatever that project was and deserve credit for it.
That’s why adding on new levels of credit to your financial profile is important because 10% of your credit score is based on new credit you have.
Don’t just open a Target (NYSE: TGT) red card (the credit one, not debit) because you want to save 5% on every purchase. If you’re making more and more purchases to save 5%, what are you really saving? That could be damaging to your credit.
Make sure your new credit is adding value and don’t just open a new card because the lender tells you too. Better yet, check out Debitize, which allows you to reap credit rewards while still paying off your balance on time for new and old purchases.
Ty Dolla $ign once said…
Just give a ***** some credit, where credit is due.
Just make sure your credit score can reflect that.
5. “Color Book” – Chance the Rapper (yes, the entire album)
The fifth element (word to Ruuuuuby Rhoooood) of your credit score is your entire credit mix. In fact, your overall credit profile makes up 10% of your credit score similar to the 10% allocation of new credit you have.
This is a mix of credit cards, mortgage loans, student loans, and all other types of credit that may be a part of your life. Since this is a collective, I didn’t it right to limit it to just one song. So, Chance the Rapper came through in the clutch with a great mix of good music on his latest project.
Next time you see your credit score and it’s gone up because you handled your business with the other four credit score components, be sure to say…
I’m gon’ praise Him; praise Him ‘til I’m gone.
When the praises go up (Good God),
The blessings come down.
Investor Takeaway: For more information about credit score, check out this graphic and breakdown on MyFICO.com.
All lyrics provided by Rap Genius.