Understanding Credit

Keeping on top of your credit profile is a good financial habit. But first, it pays to understand some of the key factors that affect what you’re seeing. Here are some of the things you need to know, including how a good score can pay off in more ways than one.

 

A credit score and credit report are two different things. A credit score is typically a single number between 300 and 850. In school terms, think of it as the number grade given to your credit report.

A credit report details your credit history — credit cards, mortgages, student loans, and public records like bankruptcies. It includes specifics, such as your payment history for each credit card and loan and how long you’ve had your accounts. You can get a free copy each year at AnnualCreditReport.com. Learn more about credit scores and reports.

 

When it comes to scoring your credit, one popular industry standard is your FICO® Credit Score. But your score can vary because the three main credit bureaus each apply unique models and formulas. Another factor is timing, since credit bureaus may update information at different times of the month. Learn more about why you have different credit scores.

 

Having a good credit score may have benefits. A high score shows lenders that you’re a responsible borrower. This may lead to lower interest rates or higher credit limits. You may also be more easily preapproved when you’re shopping for a big purchase, such as a home or car.

But your credit score may matter for other reasons, too. Insurance companies may offer lower premiums if you have a good score. And some employers consider credit scores when hiring. Learn more about the advantages of a strong credit score.

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