Credit basics

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Credit is basically your ability to obtain goods or services before paying for them. Your “creditworthiness” is based on your credit score.

What is a credit score?

A three-digit number (usually between 300–850) that represents your “creditworthiness,” or how likely you are to pay your bills on time. Credit scores can influence if you will be approved for credit cards and consumer loans like auto loans and mortgages.

They can also influence the amount of interest you will pay on those loans. If you have a higher credit score, you potentially will have lower interest rates. Conversely, if you have a lower credit score you may have higher interest rates.

Your credit score is impacted when you pay on time or late. You can always increase your credit score by making regularly scheduled payments on things like credit cards and loans. You can also help boost your score by having a good debt-to-income ratio. Generally, having debt that equals less than 35% of your annual income is considered positive.

How can I get my credit score?

You can get it from a:

  • Credit card or other loan statement, or when you log in to your online account
  • Nonprofit credit counseling agency
  • Credit score service (there could be monthly service fees for these services)
  • Credit reporting company (i.e. Equifax®, Experian®, and Transunion®). You can also request a free copy of your credit report from each of these three major credit reporting agencies once each year at annualcreditreport.com

How can I improve my credit score?

Following these steps may help you raise your credit score:

  • Set up payment reminders on all your loans/bills so you can always pay on time
  • If you're behind on a payment, get yourself caught up now
  • Contact your creditors or see a credit counselor
  • Keep credit card balances low
  • Pay off debt rather than moving it around
  • Don't open new credit cards that you don't need
  • Don't open multiple new accounts at once
  • Shop for rates on new loans within a focused period of time
  • Request and check your own credit report frequently