Credit Scores and Reports

Lenders such as banks have come up with a system to ensure that their clients will actually be able to pay them back. This system includes things like credit scores and reports.

Credit Reports

Credit reports are detailed reports that contain financial information about you for the last ~7 years. They include personal information like employment history, legal information, borrowing history, and more.

A credit report with missed payments and other such negative items will make it difficult for the government to trust you with things like loans. They will be more expensive for this reason.

Employers, insurance/credit card companies, and even landlords have the ability to review your credit report.

Credit Scores

Your credit score is a three-digit number that you can think about sort of like a "grade." It summarizes your credit report.

Credit scores take into account your payment history, number of open credit accounts, and even the age of those accounts.

Credit scores range from 300 to 850. The higher your score, the better.

Build a solid credit history and you won't have to worry as much in the future.

Top Tips

  1. Use your money and banking account wisely.

  2. Make sure you pay your bills on time.

  3. Only have one credit card- having more than one will not necessarily affect your credit score in a positive way.

  4. If you have an emergency and cannot pay your bills on time, contact your bank.

  5. Renew and review and credit report periodically. You can use AnnualCreditReport.com to do this.

  6. The best way to "get rid" of a credit card is to pay off the balance and then stop using it. Cancelling it can potentially bring your credit score down.

Resources:

Understanding Your Credit - guide on credit history, score, and more