credit FAQ: part 1
4 minuteswhat is a credit score?
A credit score is a three-digit number that shows how likely you are to repay debt. Your credit score is calculated using the payment history for loans, credit accounts and other factors in your Equifax, Experian and TransUnion credit reports.
If your credit reports show a long history of on-time payments, you may have higher credit scores, which can help you get credit with more favorable terms. If you have late payments or negative history, it can lead to lower credit scores. That can make it harder to get approved for credit and interest rates may be higher.
can I get a free credit report?
You can get a free credit report once a year from each of the three major credit reporting companies, Equifax, Experian and TransUnion. To learn more about these, visit this website: https://consumer.ftc.gov/articles/free-credit-reports
how is my credit score calculated?
There’s more than one credit score, but the one you may have heard about most is the FICO® Score. Here are the five factors FICO® uses to calculate your credit score and the weight of each1: Payment history (35%) Have you made payments on time? Amounts owed (30%) How much of your available credit is used? Length of credit history (15%) How long have you had credit? New credit (10%) Are there a lot of credit inquiries and new account openings? Credit mix (10%) What kind of accounts do you have?
how can I improve my credit score?
Make on-time monthly payments and pay down your account balances, and over time your credit score can go up. To get started, we recommend checking your credit report and credit score to see where you stand.
how can I build credit?
It’s as simple as opening a credit card or credit account, using it to make a small purchase or two, then paying off your account balance by making the minimum (or more) monthly payments on time. After a couple of months or so, your credit account will show up on your credit report and so will your payments.
how do I start establishing credit?
If you don’t have credit history, it’s never too late to establish it. Apply for a credit account with a local department store or online retailer. There are also secured credit cards. Whatever you choose, it's important to make sure your monthly payments are on time.
are there any shortcuts to build credit fast?
If you don’t have any credit or you’ve had credit challenges in the past, it’ll take time to build or rebuild your credit. There is no shortcut, but if you’re heading in the right direction – like making your payments on time and paying your balances – you’ll be building positive credit history. It may not be as quick as you’d like, but soon you’ll see it reflected in your credit report.
what is the best way to build my credit?
The best way to build your credit is to use it responsibly. That means making on-time monthly payments for your credit accounts and loans. Also, keep the balances low on your revolving credit accounts. Finally, don’t apply for more credit than you need.
what are some ways I can start to improve my credit?
One way to start to improve your credit is to keep making on-time monthly payments. Your payment history can be up to 35% of your credit score. Another way is to pay down the balances on credit accounts. The amount of available credit you use can count for up to 30% of your credit score.
1https://www.ficoscore.com/education#WhatYour
FICO® is a registered trademark of Fair Isaac Corporation in the United States and other countries.