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What a credit score actually measures

What a credit score actually measures
Unit 3 — Credit and debt
 Unit 3 — Credit and debt
What a credit score actually measures
 What a credit score actually measures
A credit score is not a measure of how responsible you are. It is a prediction of how likely you are to repay borrowed money.
 A credit score is not a measure of how responsible you are. It is a prediction of how likely you are to repay borrowed money.
Lesson 5 of 8 — about 13 minutes — CareerStart.ai Financial Literacy
 Lesson 5 of 8 — about 13 minutes — CareerStart.ai Financial Literacy
What you will be able to do
What you will be able to do
 What you will be able to do
By the end of this lesson
 By the end of this lesson 1
Describe what feeds a credit score
 Describe what feeds a credit score 2
Explain why payment history dominates
 Explain why payment history dominates 3
Identify how to build credit from zero
 Identify how to build credit from zero
Five inputs, very unequal weights
Unit 3 — Credit and debt
 Unit 3 — Credit and debt
Five inputs, very unequal weights
 Five inputs, very unequal weights
Scores generally run from 300 to 850. Payment history is the largest single factor — whether you pay on time, every time. Amounts owed, especially how much of your available credit you are using, comes next. Then length of credit history, new credit inquiries, and credit mix.
 Scores generally run from 300 to 850. Payment history is the largest single factor — whether you pay on time, every time. Amounts owed, especially how much of your available credit you are using, comes next. Then length of credit history, new credit inquiries, and credit mix.
The practical takeaway is lopsided: paying on time matters more than everything else combined. One missed payment can cost more points than years of careful management earn.
 The practical takeaway is lopsided: paying on time matters more than everything else combined. One missed payment can cost more points than years of careful management earn.
It follows you further than you expect
Unit 3 — Credit and debt
 Unit 3 — Credit and debt
It follows you further than you expect
 It follows you further than you expect
Credit affects loan approval and interest rates, but also apartment applications, utility deposits, phone plans, and in many states insurance pricing. A poor score is not a moral judgment — it is an expensive one.
 Credit affects loan approval and interest rates, but also apartment applications, utility deposits, phone plans, and in many states insurance pricing. A poor score is not a moral judgment — it is an expensive one.
Building from zero usually starts with a secured card (you deposit the limit) or being added as an authorized user on a parent’s account. Both work. What matters is small, consistent, on-time activity over time.
 Building from zero usually starts with a secured card (you deposit the limit) or being added as an authorized user on a parent’s account. Both work. What matters is small, consistent, on-time activity over time.
Key term: Credit utilization
Key term
 Key term
Credit utilization
 Credit utilization
The share of your available credit you are currently using. A $200 balance on a $1,000 limit is 20% utilization. Lower is better, and staying under about 30% is the common guidance.
 The share of your available credit you are currently using. A $200 balance on a $1,000 limit is 20% utilization. Lower is better, and staying under about 30% is the common guidance.
Why it matters at work
Why it matters at work
 Why it matters at work
You can check your own credit reports for free at the federally authorized site AnnualCreditReport.com. Checking your own report does not lower your score.
 You can check your own credit reports for free at the federally authorized site AnnualCreditReport.com. Checking your own report does not lower your score.
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