What is credit 

Credit is a line of credit, or how much a bank or some other financial institution, is willing to lend you via a credit card or a loan.

Your credit score is an indicator of how you handle money that is lent to you, and is based on your credit history.

Your credit score is a measure of your past and present handling of credit.

Your credit score may be an important factor in your financial future and will determine many things. 

35% Payment History

How well you stay on top of your bills.

The record of your on-time and late payments.

30% available credit

How much of your line of credit you’re utilizing.

Your credit limit minus the amount you owe for each account.

10% new inquiries

Records of inquiries logged when you apply for credit.

New lines of credit you’ve taken on.

10% credit mix

The variety of lines of credit you have.

A mix of loans, cards, mortgages, revolving accounts, etc.

15% Length of History

The time elapsed since each account was opened.

Strategies that can help maintain and improve your credit score.

The Secret of Success

A credit score is a point-based rating system that assesses how responsible you are with loans and debt over time. The term “FICO Credit Score” refers to a few different scores developed by Fair Isaac Corporation in 1989. FICO Scores can range from 300 to 850.

Once you start building your credit history, it’s important to stay on top of it if you want to maintain a good credit score. Tomorrow we’ll tell you about the best ways to do that.

Whatever your situation is, here are a few tips that may help you polish your credit score:

Check your credit score regularly

There are three bureaus that compile your credit history, which is used to determine your credit score. They are Equifax, Experian, and Transunion and they have one shared site called the AnnualCreditReport.com. If anything is wrong—for example, your credit report lists accounts you didn’t open, or lists accounts as still open that you can prove you closed—contact the credit bureau and tell them there’s an error. The bureaus have an obligation to correct the information. You’re also entitled to one free report from each reporting agency every 12 months. You can use one of many free apps to check your credit score, including Credit Karma, Credit Wise, Experian1, or Mint2.

Pay your bills on time

Credit card lenders report late payments to credit bureaus, typically if you’re more than 30 days late. Phone and cable companies, and anyone else who you potentially owe money to each month, might do the same thing if you stop paying your bills.

Don’t use too much of your available credit

A general rule of thumb is to never use more than 30% of the credit you have on all of your cards, according to Experian. Your unpaid balances are called your credit utilization rate, which also affects 30% of your credit score.

Don’t apply for too many cards

Every time you apply for a new card, lenders perform what’s known as a hard credit check, which can harm your credit score.

Pay down your debt

The less you owe, the lower your credit utilization rate will be, which can improve your credit score.

Consider keeping your credit card accounts open once you’ve paid off your balances

It could help your credit score if you have a high credit limit with no, or very little, debt.

Having a variety of loans could help your credit score

If you only have credit card loans, your score might be different than if you have a mortgage, a car loan, and other loans. That’s not to say that more debt is good. Instead, having different kinds of loans can show lenders you’re responsible with a variety of credit types.