What Is a Credit Score and Why Does It Matter?
Learn what a credit score is, how credit scoring works, what factors can affect your score, and why lenders use credit information.
John
What Is a Credit Score and Why Does It Matter?
A credit score is a numerical representation generated from information in a person's credit history. Lenders and other businesses may use credit scores as one factor when evaluating applications.
What Information Can Affect a Credit Score?
Credit scoring models can consider information such as payment history, credit utilization, length of credit history, types of credit accounts, and recent credit activity.
Payment History
Making payments on time is an important part of maintaining a positive credit profile. Late or missed payments can negatively affect credit history.
Credit Utilization
Credit utilization refers to how much of your available revolving credit you are using. High utilization can affect certain credit scores.
Length of Credit History
The age of credit accounts can be considered by some scoring models.
New Credit Applications
Applying for multiple credit accounts within a short period can affect your credit profile and may result in hard inquiries.
Why Does Your Credit Score Matter?
Lenders may use credit scores when evaluating applications for credit cards, loans, mortgages, and other financial products. Credit scores can also influence the terms offered by some lenders.
How Can You Maintain Good Credit?
Pay bills on time, monitor your credit reports, manage revolving balances responsibly, and apply for credit only when needed.
Credit scoring models differ, so the exact impact of a particular action can vary.
