I’m 18 - Does my credit score affect my premiums?

At this point, what doesn’t?!

Okay, we’re off to a morbid start. But I’m just trying to keep it real. And in an effort to keep it real, I’m going to tell you a few things about your credit score so that you, yes you, at whatever age you are- wherever you are- know the whole deal about credit score and how it will affect you in more ways than one if you’re not being careful.


Start paying attention…

…at 18.

What? Who? That’s cra--

Except it isn’t.

At 18, chances are you’re only just starting off- probably still in college…still living with your parents or might even be just starting a new job. And as it goes, unless you have a guardian angel watching your every move 24/7, telling you what you ought to be doing every step of the way, you’re going to have to make peace with the fact that you’re pretty much on your own.

That isn’t always a bad thing. Wise up, take notes and make the right moves.

As much as credit score might be the furthest thing from your mind, it’s time to acknowledge one thing- your credit score is going to follow you everywhere. Getting a mortgage for a home? Yep. Getting a loan for your dream car? Yep yep. Getting your dream car insured? Yep yep yep.

So if there’s one thing you should know (at twenty) it is that the ubiquitous credit score will follow you every step of the way, wherever you will go.

That get your attention? Great. Let’s move on to…


…what is this credit score after all?

Your credit score is a score that basically tells you how high your chances of borrowing money and

returning it are. I’m not going to bore you with the details, but I’ll give you a basic idea- TransUnion,

Experian and Equifax are the three credit score reporters in America.

These guys will dig into all-and I do mean all- your borrowings be it a credit card loan or even a mortgage and use these figures to work out a value that ranges anywhere between 300-850. This value determines the possibility of you paying back your loans in time. You want a higher credit score; you always want a higher score.

Okay, great. Higher score. But how do I get it?

By being watchful

You heard me.

I’m going to elaborate.

  1. Scenario A: Let’s say you pay your credit card bills on time and never carry a balance- that’s great. Whatever the loan, as long as you’re paying it back on time, your credit score will only increase.

  2. Scenario B: Let’s say you have a credit card with a higher credit limit. I’m going to say about $110k. But you’re only using about $5-7k, you’re not utilizing too much of your available credit. That’s a good thing. You don’t want to give financial institutions the feeling you rely way too much on available credit to get by anyway. Use less; it’ll help strengthen your score.

  3. Scenario C: You’re going to start building your credit at some point in your early twenties. But it’s always recommended that the earlier you start opening accounts, the better your chances of strengthening your score.

  4. Scenario D: Getting a whole bunch of credit cards over a period of say 6 months is unwise. It might be tempting when you just start working- but stay away. You don’t need 3 or 4 credit cards. Financial companies will dig into your credit report to see if you’re eligible to get credit and this will only work against you. Start with 1- that’s all you need anyway.

Now all these factors come into play when it comes to determining your credit score. A lower credit score communicates your inability to make payments on time. So you see why auto insurance companies might be reluctant to cover you or charge a lower interest rate? Because you’re a risky candidate and covering you might end up being costly to them.

Moral of the story- keep your credit clean. If you’re worried about high insurance rates, feel reassured knowing insurance companies like The Hartford insurance offer a whole bunch of discounts to help bring down your rates. You’d be wise to find out about the different kinds of discount auto insurance companies offer when shopping for rates.

Ultimately, it’s all a question of keeping your credit score strong. Make timely payments, NEVER carry over a balance, and ALWAYS keep a close watch on your credit. You can actually do it for free by using Credit Karma to get your credit score. They also tell you how to optimize your credit score, so you can breathe easy knowing someone’s got your back after all.

Start early. Start at 18. Start!

Author Bio

Elvis Donnelly, a father of two who works from home. I am a voracious reader and like to keep abreast of current affairs on personal finance, technology and innovation. In my spare time, I love taking on home improvement projects and consider myself a closet chef.

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