How to Build Good Credit – A Crash Course
Want to learn more about what a credit score is and why it’s so important? Well, you’re in the right place! We at GO2bank™ strive to make credit more accessible, more affordable, and easier to understand. This educational resource should answer questions you may have about how credit scores are calculated, products that can help you build credit, and more. Let’s dive in.
In this article:
What’s a credit score?
Why do credit scores matter?
How are credit scores calculated?
How can I check my credit score and credit report?
How do I know if I have a good or bad credit score?
How can GO2bank help me build credit?
What’s a credit score?
A credit score is a three-digit number used to represent your credit worthiness, or how likely you are to repay a lender like a bank, credit card company, or landlord. It’s based on your history of paying back debt, and this history of your payments makes up your credit report. Credit scores and credit reports are generated by the 3 major credit bureaus - Equifax, Experian, and TransUnion. By factoring in your different accounts, loan amounts, current balances, and payment history, these bureaus can then calculate your credit scores.
Why do credit scores matter?
When you apply for any type of credit, like a loan, new credit card, or mortgage, the lender will look up your credit score to get a better idea of how likely you are to pay off debts on time. A credit score can not only help a lender determine whether you qualify for a loan, but also how much to lend you and at what interest rate. So, the better your credit score is, the more likely you can qualify for a loan and the easier it can be to secure a lower interest rate. This could result in lower monthly payments for you!
How are credit scores calculated?
There are 5 main factors that make up your credit score. Understanding each of them is important to building or repairing your credit.
Payment history: How well you pay your debts on time. This is the most important factor that makes up your credit score. The key to having a good payment history is maintaining a track record of on-time payments. Then it’s more likely your credit score will be higher.
Amounts owed: How much of your available credit you use every month. Keeping your credit balances low relative to your credit limits makes you a responsible borrower in the eyes of lenders. For example, it’s a good practice to keep your credit card balance lower than 50% of your credit card limit each month.
Credit history: How long your credit accounts have been open. The longer you use credit, the better overall picture a lender can get of your credit worthiness.
Credit mix: How many different types of credit (credit card vs. loan) you have. Showing good payment history on different types of credit products, like a 5-year car loan and credit card payments, demonstrates a well-rounded credit worthiness for lenders.
New credit: How many recent inquiries have been made on your credit report. Lenders understand that consumers need to apply for credit to make purchases, but if there are a lot of credit applications on your credit report, it can hurt your credit score. Try to keep credit applications down to 2-3 a year, at most.
How can I check my credit score and credit report?
You can get your free annual credit report by visiting http://www.annualcreditreport.com. With the GO2bank™ Secured Visa® Credit Card, you also have access to your free monthly credit score from VantageScore® powered by Equifax®. There are other ways to get access to your credit score by visiting the Experian®, Equifax®, or Transunion® websites. Your credit score might be different between credit bureaus and might change month-to-month.
All of our GO2bank customers have free access to their FICO® Score and Experian credit file when they enroll in Experian Credit Care Advantage™.
How do I know if I have a good or bad credit score?
Each credit bureau will tell you whether your credit score is good or bad when you access your score, but the guide below can help give you a better idea of the score ranges.
How can GO2bank help me build credit?
Don’t worry if you don’t have any credit yet or your credit score isn’t all that great– it’s never too late to build your credit. Building credit has never been easier with the GO2bank Secured Visa® Credit Card.
But remember, making your payments on time each month is the key to building credit.
Never miss a payment on your GO2bank Secured Credit Card with auto pay. Sign up and have your payments automatically deducted from your GO2bank account on the date you choose. Setting up auto pay is fast and easy.
No matter where you are on your credit building journey, we’re here to help. Learn more about how we can help give your credit an extra advantage.
