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Understanding Credit

Credit Score

What is a credit score and how does it affect me?

Your credit score is a number that represents the risk a lender takes when you borrow money. The most widely used credit score is a FICO score, which is a well-known measure created by the Fair Isaac Corporation, and used by credit agencies to indicate a borrower's risk. When a consumer applies for credit – whether for a credit card, an auto loan, or a mortgage – lenders want to know what risk they'd take by loaning money.

Credit Score Scale

Credit score range (FICO classic and FICo 8 - Range 300-850), Excellent 780-850 - qualify for best interest rates, Very good 740-779 - usually qualify for best interest rates, Abover average 720-739 - may face slightly higher interest rates, Average 680-719 - may qualify for most loans at higher interst rates, Poor 580-619 - usually has some credit issues; will probablynot qualify for ost loans, Very poor 520-579 - has several credit issues; unlikely to qualify for any loan, Worst below 520 - facing extreme credit issues. Source: AI BIngham


Components of a credit score (how the FICO score is calculated)

New credit - how much of your available credit is new? 10%, Types of credit used - what is your mix of credit cards, retail credit, student loans, mortgages, etc.? 10%, Length of credit history - How long have you been using credit 15%, Payment history - have you paid your past credit accounts on time? 35%, Amonts owed - how much do you owe and how much of your available credit have you used? 30%


Find out your credit score FREE!

You may access a FREE credit report in detail once a year through Annual Credit A detailed credit report will show month by month payment status, every lender you’ve borrowed from, and their contact information. You should review your credit annually for accuracy and discrepancies. Get your free report that will include the major agencies, Equifax and TransUnion at

Did you know that when you apply for credit your score is affected by a “hard inquiry” that can lower your score a few points each time? Want to monitor your credit a little closer? You can check your credit score, at any time, without affecting your score using Credit Karma. Using Credit Karma will also allow you to receive alerts when an account is opened in your name….and the best part is it’s FREE. You can access it online or download the app on any smart device. Try it at Credit Karma.

How to establish credit

  • Use secured credit cards. A secured credit card is just like a regular credit or unsecured credit card, you are required to put down a security deposit to provide assurance to the creditor that you will repay your debt. Your credit limit is often the amount of your security deposit.
  • Use gasoline credit cards.
  • Place utilities in your name.

How to maintain a good credit score

  • Pay your bills on time.
  • Keep your credit card balance(s) low or at zero.
  • Manage your debt.
  • Check your report regularly. Report any suspicious activity immediately.
  • Only apply for credit when you need it. If you close a credit card account, your credit score will decrease. Likewise, if you have too many open accounts, lenders view it as potential debt and may not grant you a loan.
  • Contact your lender if you fall behind on your payments.

Credit Cards

A credit card is a revolving line of credit that allows you to make charges at any time up to the amount of a specific credit limit.

When you swipe your credit card, your bank loans you the money to make that purchase. A debit card requires you to have the money upfront for a purchase, while a credit card allows you to make purchases with the promise that you will pay the card issuer the amount back, in time. A credit card offers you the option to choose how much to repay each month—a minimum payment, a partial payment or your entire balance. With few exceptions, responsible credit card users always pay their balances in full every month.

After you make a purchase with your credit card, the bank gives you a grace period—typically between 20 and 30 days—during which you can pay off that purchase before interest begins to accrue.

Grace periods are powerful because they give you the opportunity to use your credit card as a short but interest-free loan. As long as you pay every penny you charged last month before the due date, you won’t pay interest on credit card purchases

Learn more at: How to Use A Credit Card Responsibly

Credit cards can provide great perks and allow you to earn cash back or rewards for your purchases. They also serve as tools for helping you build credit, which can be important if you want to buy a house or car one day.

But there are some risks involved in using credit cards, and if you’re opening a credit card for the first time, you may be nervous.

However, if you’re aware of the dangers of credit cards, you can avoid making these mistakes while using credit cards wisely and taking advantage of their perks, benefits and rewards.


Helpful tools when considering credit cards:

Credit card comparison spreadsheet

Federal Trade Commission on credit cards: Using A Credit Card

FBI on credit card fraud