What is a credit score?
What is a credit score?
A credit score is a number between 300 and 850 that helps bank, credit card, and loan companies know how reliable you are at paying them back and paying on time.
Think of your credit score as one way to measure your financial health.
Why does your credit score matter?
A credit score is used when you:
Rent an apartment
Get a school loan
Put utilities in your name
Lease or buy a car
What if my credit score is low?
If your score is low you may have trouble getting approved to get a loan or credit card. If you are approved, you may have to pay a higher interest rate, which will make it difficult and expensive for you to borrow money.
How is my credit score calculated?
Your credit score is influenced by 5 things:
Payment history (35%)
Record of payments you’ve made on any form of credit
➤ Pay your bills on time.
Late payments stay on your record for 7 years
Amount owed (30%)
Total amount you owe, across all of your credit accounts
➤ Reduce the amount of money you owe, and keep your available credit high
Length of credit history (15%)
How long your oldest account has been open
Type of credit (10%)
What types of credit you have, such as credit cards, store cards, or loans
New credit (10%)
Applications for new credit cards or loans
➤ Don’t apply often for a new credit card or loan
What can I do to improve my credit score?
The 5 best ways to improve your credit are:
Use payment reminders or automatic payments to help you make payments on time
If you miss a payment, catch up as soon as you can
Pay as much as you can on your credit line with the highest interest rate, but keep making minimum payments on your other accounts
Don’t apply for or open unnecessary accounts, such as bank credit cards or store credit cards
Don’t check your credit score more than once a year with a credit reporting agency, like TransUnion
How can I check my credit score without hurting it?
You can check your credit score through your bank, or a trustworthy monitoring app like Credit Karma, and it shouldn’t affect your score.