If you struggle to understand credit repair and the credit repair process, a good way to break it down is to compare it to a high school GPA – or grade point average. Understanding your credit score is the first step to repairing and rebuilding your credit!
Your Credit Score GPA
Your grades in high school are based on how well you perform, and that grade, or performance, dictates your GPA. The algorithm in high school is pretty simple:
- A = 4
- B = 3
- C = 2
- D = 1
- F = 0
To calculate your cumulative grade point average, just add up the total number you received for each grade and divide it by the number of classes you took.
If you get an F your first year of high school, it will continue to work against you all the way through high school. Even if you get an A in the next class, that will only equal out to about a C.
Your high school transcripts are a four-year history. Now, let’s compare that to credit scoring. Instead of a four-year transcript, credit reporting is a seven-year look back. So it’s a little bit longer. The “F’s” from your past stay with you a little bit longer.
Just as your grades are based on performance, your credit score is based on performance as well. The performance you’re being graded on in the financial world is paying things on time.
There are some pretty significant ways that GPA and credit score differ, however. For example, if you have a tough junior year and don’t pass any of your classes, they don’t kick you out of school. You get to come back and redo your junior year.
That isn’t necessarily the case with credit. Once you get below the 550 mark, they might kick you out of class. Creditors don’t want to extend you credit anymore because you have a history of not paying your bills.
One of the keys to getting back into the credit game is reestablishing your credit. The most inexpensive way to do that is going to be a secured credit card. A secured credit card is basically saying “Hey, I know I don’t have the best pay history, so I’m going to send you a couple hundred dollars up front, and that way if I don’t pay you, you aren’t out anything.”
Reestablishing credit for the first time is like getting back in class. You can’t improve your GPA if you’re not in class. So you’ve got to get back in the credit game to improve your credit score.
Ready to start reestablishing your credit? Learn more about our options for rebuilding your credit fast!