Know Your Credit Score
Understanding your credit score is an essential step in taking control of your financial well-being. Your credit score not only influences your ability to borrow money but also affects the interest rates you receive and the financial opportunities available to you. Being proactive about your credit helps you secure your financial future and protects your reputation as a responsible consumer.
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2-MINUTE
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How Credit Scores Are Created
12-MINUTE
COURSE
Understanding Credit Reports and Scores
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ADDITIONAL RESOURCES:
Who’s Keeping Score? Understanding Your Credit Score and Why It Matters
(FAME WEBINAR 01:17:15)
Key Ideas
Your Credit Report
Your credit report is a snapshot of your financial life—a financial report card. It reflects bill payments, the total amount of credit extended to you, and how much you owe on your accounts.
Your credit report contains…
- Your name, Social Security number, date of birth, current and previous addresses, and employers
- Credit account information, such as dates opened, credit limit, balance, monthly payment, and payment history
- Bankruptcy, unpaid taxes, and in some states, overdue child support
Who may look at your credit report:
- Potential creditors
- Landlords
- Current and potential employers
- Government licensing agencies
- Insurance companies
Negative information on your credit report can have a serious impact your ability to…
- Borrow money
- Get a job
- Advance in your current job
- Rent or buy a home
Length of time information stays on your credit report:
- Positive information remains on your credit report indefinitely.
- Credit inquiries are included for six months to two years.
- Negative information typically stays on your report for seven years.
- Some bankruptcies and foreclosures may remain on your report for as long as ten years.
Your Credit Score
If your credit report is your financial report card, think of your credit score as your GPA. There are many credit scores, but, the FICO score is the most widely used for individuals. FICO scores range from 300 to 850 and are used as a measure of your creditworthiness. A score above 700 usually suggests good credit management.
Your FICO score is determined based on the following:
- Payment History (35%): Timeliness of payments and any derogatory marks like bankruptcies or late payments.
- Debt Burden (30%): Total amount of debt and credit utilization.
- Length of Credit History (15%): How long credit accounts have been active.
- Types of Credit Used (10%): Variety of credit accounts, such as credit cards, mortgages, and installment loans.
- New Credit (10%): Recent credit inquiries and new accounts.
Activities
- Check your credit report at AnnualCreditReport.com, which
- MyFICO.com is a credit monitoring service provided by the Fair Isaac Corporation (FICO), which offers access to FICO credit scores, credit reports, and monitoring services. It has both free and paid subscription options, allowing users to track their creditworthiness and receive alerts about changes in their credit reports.
