Credit Score

What is a credit score?

A credit score (e.g., FICO score) is a three-digit number, ranging from 300-850, that represents a person’s dependability as a borrower. The FICO scores are generated from the Equifax, Experian, and TransUnion credit reports. Every day, thousands of U.S. lenders use FICO scores to make more well-informed credit-granting decisions.

FICO scores are composed of:

Payment History (35%): whether or not you’ve paid past credit accounts on time
Amounts Owed (30%): credit utilized compared to the amount of available credit
Length of Credit History (15%): length of time credit has been open and utilized

Credit Mix (10%): mix of credit lines in use (credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans)
New Credit (10%): lines of credit opened within a short, recent period of time

Establishing Credit While in College

Apply for a credit card or secured card. If you can't get a regular credit card, apply for a secured credit card, which requires you to deposit money with a lender prior to usage.
Become an authorized user on someone else's credit card. One way to establish credit history is by "piggybacking" on someone else's good credit. A family member or someone else you trust may be willing to add you as an authorized user on their account.
Get a Co-Signer. You may be able to receive a loan or a credit card using a co-signer. Make sure you and the co-signer fully understand the terms of the loan before proceeding.

Strategies for Good Credit

Check your credit report. See what lenders are learning from your report, make sure there are no errors, and monitor your report for identity theft.
Always pay your bills on time. This is the best way to show creditors you are responsible with your money.
Be particular about your credit cards and loans. Apply only for the credit you really want. Each time you apply for credit, your credit score takes a small hit, so open new lines of credit sparingly.
Charge small purchases on your credit card, and pay off your entire balance every month. It’s better to charge small purchases on your card, paying them off every month, than to never use your credit card. If you cannot pay off your entire balance, make sure you at least make the minimum payment.
Pay your credit card bills automatically. Automatic payments help you avoid late or missed payments, fees, and interest.

What is a FICO® Score? — FICO Credit Education Series

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