Question 1

What are credit scores?

Accepted Answer

A credit score is a three-digit number that lenders use to determine your creditworthiness (your reliability to pay back a loan on time).

Question 2

Why are credit scores important?

Accepted Answer

Your credit score can impact many aspects of your financial wellness journey, including insurance premiums, interest on loans (including cosigned student loans or non cosigned student loans), credit card rewards, and even cable or phone prices and eligibility.

Question 3

How do I check my credit score?

Accepted Answer

Though it is possible to contact the credit bureaus directly for your reports, the government-authorized website is AnnualCreditReport.com.

Question 4

What’s a good credit score?

Accepted Answer

Typically, scores below 580 are considered “poor,” 580-669 is “fair,” 670-739 is “good,” 740-799 is “very good,” and 800-850 is “exceptional.”

Question 5

How often are credit scores updated?

Accepted Answer

Credit scores are updated whenever new information is sent to a reporting agency, usually once every month or month and a half. However, there is no hard and fast rule.

Question 6

Why are my three credit scores different?

Accepted Answer

Your Experian, Equifax, and Transunion scores may differ because the credit bureaus have different information, information hasn’t reached them, or they weigh factors differently.

Question 7

How are credit scores calculated?

Accepted Answer

Credit scores look at your length of credit history, types of credit, payment history, and amount of debt, then use those data points to help lenders evaluate how creditworthy you are. FICO has also started incorporating bank account information as another variable.

Question 8

When should I start building credit?

Accepted Answer

There are benefits to building credit as early as possible. Some banks allow minors to be authorized users on their parents’ credit cards, for instance, which can help you begin to establish credit at an early age.

Question 9

Why are credit cards so important for building credit?

Accepted Answer

Credit cards have limits based on your payment history, and how trusted you are to repay what you’ve borrowed. If you have a high credit limit and an on-time payment history, credit agencies are more likely to see you as a creditworthy borrower.

Question 10

How does paying down my loans and credit cards affect my credit?

Accepted Answer

Paying down loan amounts and credit cards can slowly make your credit score go up, but the effects aren’t usually immediate.

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