The top things that affect your credit score

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Payment history

The most important thing is that you pay all of your bills on time. Any missed or late payments have a negative impact on your credit score. Keep in mind that this may apply to many of your bills, not just loans and credit cards.

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How much you owe

Using your whole credit limit may have a negative impact on your credit score. It’s better to keep balances low.

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Credit history

How long you’ve been using credit also matters. The longer, the better. So if you are new to credit or rebuilding credit, start building a good credit history now.

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Types of credit

Your credit scores improve if you have different types of credit, such as auto loans, credit cards, student loans, etc.

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Debt-to-income ratio (DTI)

It’s the percentage of how much you make each month that you have to pay on recurring payments, like a credit card. If it gets too high, it can negatively affect your credit score.

How long does it take to build good credit?

Each person’s situation is different, so there is no exact answer to how long it will take to build your credit. It’s better to think of it as an ongoing process that you should always be working to improve. Your credit score takes into account a whole bunch of information, and much of it takes time to affect your score. This just makes it more important that you work to build your credit wisely.

Credit report and credit score

What’s the difference, and how are they used?

Credit Report Credit Score
Contains the details of your credit history, including balance, credit limit, and payment status. A number that summarizes how you’ve used credit. The higher the number, the better.
Can be checked by lenders, apartment managers, employers, and others to see how responsible you are with money. Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan.
You can check it for free once per year at annualcreditreport.com. When it’s time for you to borrow money, knowing your credit score will help you better understand your credit options.

Credit Score

Credit Report

Contains the details of your credit history, including balance, credit limit, and payment status.

Can be checked by lenders, apartment managers, employers, and others to see how responsible you are with money.

You can check it for free once per year at annualcreditreport.com.

A number that summarizes how you’ve used credit. The higher the number, the better.

Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan.

When it’s time for you to borrow money, knowing your credit score will help you better understand your credit options.

An example of smart credit use

 
Step 1: Jill gets a job and her first credit card. Step 2: She makes purchases and makes her payments on time. Step 3: Her credit history grows over time. Step 4: She buys a used car and can finance it herself, and she makes all her payments. Step 5: Due to her good, long credit history, she gets a great interest rate on her first home.

An example of smart credit use

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1. Jorge is new to the country and gets his first credit card

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2. He makes purchases and makes his payments on time

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3. His credit history grows over time

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4. He now qualifies for a car loan and buys a used car

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5. Due to his good, long credit history, he gets a great interest rate on a new home

 

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Congratulations! You've passed all the quizzes!

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Follow these guidelines and use your credit responsibly, and you’ll be on the path to good credit.

For more about building and managing your credit, visit our Smarter CreditTM Center.


 

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