Everything you Need to Know About Credit

Your FICO score ranges from 300 to 850. The higher the score, the more likely you are to be approved for a loan – and the better your interest rate. The lower your score, the harder it will be to get approved. And your interest rate will only go up.

Another modeling system – VantageScore – is also used. Very often, credit tracking services like Credit Karma use the VantageScore model. Both scores rely on the 300 to 850 range, and both look at the same criteria in assigning a score. The weight given to each criteria, though, may differ between the two methods. This slightly skews how high a VantageScore you may need to qualify for a loan. In other words, if your credit tracker gives you a VantageScore, but your lender relies on FICO scores to make lending decisions, you may not get the interest rate you were expecting.

It’s also easier to start building your VantageScore. To qualify for a FICO score, you must have one tradeline item (loan, line of credit, credit card) open for at least 6 months. VantageScore, on the other hand, just requires that you have one tradeline item open.¹

FICO vs. VantageScore: How They Stack Up Against Each Other

But Why Does My Credit Matter So Much?

Your credit is like your reflection: it’s going to be with you forever. And it can open – or close – doors (sometimes, literally). You may already know that your credit impacts how likely you are to qualify for a loan. This includes car loans, personal loans, credit cards, lines of credit, and mortgages. Your score is also going to determine the interest rate you get. The higher your score, the better your rate.

So why does that matter?

A lower interest rate means your monthly payment will be lower. And, on the flip side, a higher rate will make your monthly payment higher. So, in a very real way, a low credit score will cost you money.

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Landlords and property managers also reference credit reports when you submit an application for an apartment. If your report shows a history of late payments or a foreclosure, they may not rent to you. Utility companies and insurance companies may also request your credit report, although state laws vary on their ability to access and use it.²

And think about this: buying a car or house is stressful enough. Worrying about whether your credit is going to prevent you for either of those is an added stressor you don’t need. Focus on healthy credit habits from the beginning: don’t spend more than you can afford, pay all your bills on time every time, and use credit responsibly.

How do I get my score? How often should I check it? 

You’re entitled by law to a free credit report from each of the three bureaus every year. It’s easy to request them here. Requesting your credit report doesn’t impact your score. Make a yearly reminder to check your report for any inaccuracies. Remember, your report may differ across the bureaus so check it from each one. And contact them right away if you notice an error.

To stay on top of your credit score, there are several trackers you can use. Many lenders, banks, and credit unions also include a credit score monitoring tool with your account. You should regularly monitor your score, especially if you plan on applying for any credit in the near future. You may also want to sign up for a credit monitoring service. This service will alert you if anyone applies for credit in your name.

Can I Change My Credit Score?

Your credit score is entirely in your hands. Sometimes emergencies mean we need to take on debt or use our card more than we like, but with planning and discipline you can almost always repair your credit without outside help.

And the fact is, it’s your daily habits that will make the biggest impact on your score.

Here’s how you might be hurting your credit score

1. Paying bills late. This is the single biggest mistake to make. Payment history is the biggest piece of your score, and late payments can knock your score down. If you’re struggling to make a payment, contact your lender or card company before a payment is late to ask for help. They will have programs in place to assist you.
2. Carrying balances. The availability of credit is another piece of your score, and if you’re carrying balances it means less credit is available to you. It also makes financial sense – no balances means no monthly payment.
3. Applying for too much credit. Bureaus look at how often you apply for credit and how many credit accounts you open. A few here and there isn’t going to hurt you, but too many too often can bring your score down.