Credit 101: Everything you need to know about credit, credit history and credit scores

And, by NerdWallet you can build a credit history by partnering with someone who already has it. For example, you can co-sign an apartment lease with a relative or become an authorized user on their credit card. The landlord or the bank will have the security of knowing that someone with an established credit history is responsible for payment, and you will begin to establish your own history as the rent or credit card bill is paid. because your name is there too.

What is a credit score and how is it used?

Your credit score is a three-digit number (between 300 and 850) linked to your social security number, determined by your credit activity and referenced in all sorts of circumstances. “It’s not just about big purchases like cars and houses,” Game says. “Your credit score is also used for any type of loan you apply for, credit cards, your cell phone contract, utility bills, private student loans, renting an apartment, and even some jobs. view credit score as a factor in your potential as an employee.

A low credit score could mean you’ll be turned down for a loan you apply for, Game says, because “your credit score is a measure of your creditworthiness.” And even in cases where your score doesn’t prevent you from getting something you’re applying for, it can affect the actual deal you make. “A low credit score won’t necessarily get you turned down for an apartment lease, [for example]“, says the game.”[But] this could mean that you will have to pay more deposit.

When it comes to credit cards and car and mortgage loans, for example, your credit score affects the interest rate, or the amount you pay the bank or lender to borrow money. (With credit cards, we talk about annual percentage rate (APR), but you pay only that if you don’t pay your statement balance in full each month.) “The lower your credit score, the higher the interest rate,” says Game. “The higher the interest rate, the more you will end up spending to pay off that debt. […] Sometimes the difference between an average credit score and an excellent one can mean hundreds or even thousands of dollars of what you’ll end up paying overall.

What Impacts Your Credit Score?

“There are five main factors for your credit score,” Game explains. “Do you pay your bills on time, how much available credit do you use, the length of your credit history, the mix of your credit types, and the number of credit inquiries you’ve had over time.”

According to Wells Fargo, your payment history and your current debts (the amount of money you are currently borrowing and have not repaid) are the two most important factors; but the other three still have an impact. For example, as Game noted, your combination of credits can improve your score. “Think of it like going to the yogurt store and adding all your favorite toppings,” she says. “The more “trims” or different types of credit you have, the better your score. Think of things like student loans, car payment, bank credit cards, retail cards, gas credit cards, and any other loan.