A credit score summarises how reliably you have repaid borrowed money. Lenders use it to set the rate they offer.
Step 1: Let's Learn
Read it, or press Listen and follow the words.
What moves it
Payment history matters most, followed by how much of your available credit you use. Length of history, new applications and account mix follow.
Utilisation
Using a small share of your available credit helps. Running a card near its limit hurts even when payments are on time.
It moves slowly
A score falls quickly after a missed payment and recovers over months. There is no fast repair.
What it costs
A low score can add several percentage points to a mortgage rate, which is tens of thousands of dollars over the loan.
Check the report
Credit reports contain errors. Checking yours is free and is the one repair anybody can make immediately.
What a credit score summarises
It is a number derived from a borrowing history, used by lenders to price risk. It is not a measure of wealth or income — a person with no debt and no history may have no score at all.
What moves it
Payment history and amounts owed relative to limits carry the most weight, with length of history, new applications and mix of credit contributing less. Late payments are the single most damaging common event.
The score sets the rate
A lower score means a higher interest rate on the same loan, which over a long mortgage can amount to a very large sum. That is the concrete financial consequence, and it is why the number matters.
Check the report, not just the score
The report lists the underlying accounts and is where errors appear. Reports can be obtained and disputed, and an error corrected is worth more than any technique for improving the number.
Step 2: Try It Yourself
Tap and try it out.
Good score
Fair score
Poor score
Poor score has the most. It has 130 more than Good score.
Step 3: Watch an Example
One step at a time.
Watch Diego Price a Score
Two borrowers take $20000 car loans. One pays $380 a month, the other $450, both over 60 months.
- Step 1
The first borrower pays 380 × 60 = $22800 in total.
Step 4: Your Turn
Practice makes it stick.
The Difference
Problem 1 of 2
$380 a month against $450 a month over 60 months. Total difference in dollars?
dollars
The Utilisation
Problem 2 of 2
A $500 balance on a $2000 limit. What is the utilisation, in percent?
%
What It Costs
1 of 8
$300 balance on a $1500 limit. Utilisation in percent?
2 of 8
$900 balance on a $1000 limit. Utilisation in percent?
3 of 8
$400 a month against $460 over 60 months. Total difference in dollars?
4 of 8
Which factor matters most? 1 payment history, 2 account mix.
5 of 8
Does checking your own credit report cost money? 1 yes, 0 no.
6 of 8
Does a score recover as fast as it falls? 1 yes, 0 no.
7 of 8
Which actions help a credit score?
8 of 8
$250 balance on a $2500 limit. Utilisation in percent?
Step 5: Quick Check
Show what you know.
Question 1 of 2
$600 balance on a $3000 limit. Utilisation in percent?
Question 2 of 2
Which factor affects a credit score most?
What You Learned
- A credit score summarises repayment reliability and sets the rate you are offered.
- Payment history matters most, then how much of your credit you use.
- A low score can cost thousands of dollars on a single loan.