Your credit score is a detailed record of your financial life—how much you owe, who you owe it to, and whether you pay your bills on time. Now picture this information being gathered, shared, and then used by other people making important decisions about your life. Decisions like whether you should be given a loan, an apartment, or even a job. Sound far-fetched? It’s not. Your credit score can have a big impact on your life. That’s why understanding your credit score is an essential step to building a financially secure future.
Your Credit Score
It’s a snapshot of how responsible you are with money.
With a high credit score, you’ll be eligible for the best credit terms and financial products. With a low score, you may not be able to get credit and financial products at all, or you’ll pay much more for them.
The most commonly used credit score is the FICO score. It ranges from 300 to 850. The higher your score, the better, and anything above 720 is considered excellent.
They are companies that keep track of whether you pay your bills. They check with all of your creditors each month to see if you paid on time.
There are three major credit bureaus: Experian, Equifax, and TransUnion.
The three major credit bureaus have created their own credit score, VantageScore.
Your credit report is the record that the credit bureaus keep of your financial history. Because each of major credit bureaus creates its own report, you actually have three different credit reports.
Your credit score comes from the information on your credit reports. That means that your credit score and your credit reports are related, but they are two different things.
Negative information—like late bill payments—stays on your credit reports for 7 years.
To make sure that the information on your credit reports is accurate, you should check them annually.
The elements of a credit score
Credit scores are made up of five elements: your payment history, the total amount of debt you have, the length of your credit history, the types of credit you have, and how often you open new lines of credit.
That means that 80 percent of your score comes from simply paying your bills on time, not borrowing too much, and starting early.