Understanding Your Credit
Learn more about credit and why it's important to maintain a healthy credit score.
Credit is a powerful tool
What is credit?
Your credit score is more than just a number; it's a reflection of your financial health. We're here to demystify the subject and answer some common questions related to credit.
A closer look at credit scores
Credit scores are three-digit numbers that reflect creditworthiness. They are calculated based on various financial behaviors. Understanding what your credit score represents is the first step to managing it effectively.
Why credit scores matter
Lenders use credit scores to decide on credit offers, loan terms and how much the loan or credit will cost you. The higher the credit score, the easier it is to secure a loan with a favorable rate and term. As a result, individuals with higher credit scores are offered more competitive rates and pay less for the money they borrow.
Factors influencing your credit
Your credit score is influenced by multiple factors. Familiarizing yourself with the following factors can empower you to make decisions that positively impact your credit:
- Payment history
- Credit utilization
- Length of credit history
- Types of credit accounts
- Recent inquiries
Credit-building habits
Building good credit starts with responsible financial habits. Whether you're starting from scratch or working to improve your credit score, these tactics can help you boost your creditworthiness:
- Set up automatic payments to pay your bills on time
- Keep credit card balances low in relation to your credit limit
- Maintain a mix of different types of credit if possible
- Regularly monitor your credit reports for errors or discrepancies
- Try not to close old credit card accounts as they contribute positively to your credit history
- Avoid opening multiple credit accounts in a short period as it can lower your average account age
