Credit Scores: What They Are and Why They Follow You
A credit score is a number that summarizes your history with borrowing and repaying money. It affects your ability to rent an apartment, get a car loan, or qualify for a credit card. This lesson breaks down how it's calculated and how to build one from scratch.
What a credit score actually is
A credit score is a three-digit number (300–850) calculated by credit bureaus — Experian, Equifax, and TransUnion. It summarizes your credit history: how much you've borrowed, how reliably you've repaid, how long you've had accounts. Lenders use it to decide whether to extend credit and at what rate.
Poor — limited options, high rates if approved
Fair — some options, but not the best terms
Good — most lenders will work with you
Very good/Excellent — best rates, most options
How it's calculated
The FICO score uses five factors: payment history (biggest — do you pay on time?), credit utilization (how much of your available credit you use), length of history, types of credit, and new inquiries. Payment history and utilization together make up about 65% of your score.
Why it matters beyond just loans
Credit scores are checked in more situations than most people realize. Landlords check credit before renting apartments. Some employers check for certain jobs. Car insurance companies use credit-based scores in most states. A higher score can also save you thousands over the life of a loan.
Building credit from zero
Starting from no credit history is different from bad credit. Common ways to start: become an authorized user on a parent's card, open a secured credit card (deposit money as collateral), or get a credit-builder loan through a credit union. The key: use the account, pay in full and on time, keep your balance low relative to your limit.
Which factor has the biggest impact on your credit score?
Recap
- A credit score (300–850) summarizes your borrowing and repayment history.
- Payment history is the biggest factor — paying on time consistently is the single most important thing.
- Starting from zero is not the same as bad credit — there are specific ways to build history.
- Next up: how credit cards actually work — including the details that make or break whether they help or hurt you.