Credit Score 101

What is a number in your life with potentially more long-term consequences than your SAT score, your address, or your salary? Yep, the title gives it away—your credit score!

Growing up, my mom always talked about "building credit," but it took me much longer to understand the true significance of this one number. And because I know that so many of you out there didn’t have access to personal finance education (truly, it baffles me that these things aren’t taught in schools), I want to give you a high level overview so you can feel a bit more confident in these areas.

Disclaimer: I’m not a financial professional and this article is for educational purposes only!

What is a credit score?

A credit score is a number created from a handful of metrics tracked by credit bureaus (Equifax, Experian, and TransUnion). These metrics are aggregated into a score—typically a FICO Score or VantageScore (they're similar, but FICO is more commonly used by lenders). Lenders like banks, credit card companies, or mortgage providers use this score to determine how trustworthy you are when it comes to borrowing money.

How is my credit score used?

At its simplest, some institutions may not allow you to open an account or take out a loan if your score is too low. More commonly, it affects the interest rate you're offered (meaning you'll pay more in the long run if your score is low) or how much money you're approved to borrow. It also impacts things like renting an apartment, setting up utilities, and even your car insurance rate. For example, my friend Jen was turned down for a dream apartment because her score was just under 600—even though she had a steady job and savings.

What is a good credit score?

Credit scores range from 300 to 850. Generally:

• 700 and up is considered good

• 750 and up is very good

• 800 and up is excellent

How is my credit score calculated?

This is where it gets interesting—and a little murky. The industry doesn’t provide complete transparency, but here’s the general breakdown (credit to Ellevest for a helpful breakdown):

• On-time payments (35%) – Translation: Do you pay your bills on time? Even one late payment can ding your score.

• Credit utilization (30%) – Translation: How much of your available credit are you using? Lower is better—ideally under 30%, and under 10% is even better.

• Age of credit (15%) – Translation: How long have you had credit accounts open? Longer histories look better.

• Credit inquiries (10%) – Translation: How often are you applying for new credit? Too many hard inquiries (like applying for a new card or loan) in a short time can hurt your score. Don’t worry—checking your own credit score is a soft inquiry and doesn’t affect your score.

• Types of credit (10%) – Translation: Do you have a mix of credit types, like a credit card, a car loan, and a student loan? A mix helps, but it’s not a reason to take out unnecessary credit.

But I don’t want "credit"—I don’t want to be in debt. So does this matter to me?

Absolutely, and you’re smart to be cautious about debt. But here’s the thing—having access to credit and being in debt are not the same thing. If you only put charges on your credit card that you can pay off in full each month, you’re not going into debt and you’re building good credit.

Credit is important because it’s how business qualify if you’re financially trustworthy - they called it “credit worthiness.” Even if you have been incredibly financially responsible, without the demonstrated credit worthiness, lenders (for houses, cars, credit cards, business loans, etc.) will be less likely to lend to you at all and potentially at higher rates.

So having a good credit score can actually save you thousands over time, when there eventually comes a time where you want to take advantage of the “good” type of debt - like a mortgage. But building credit takes time which is why it’s so important to start paying attention now (and why I’m so annoyed that they don’t teach this in school).

If for whatever reason, you’re uncomfortable with a credit card, you have options. This is actually a solid sign that you’re financially aware of knowing how credit cards if not used correctly can wreck your financial future, so kudos! The good news is you can also build credit without a credit card. Some options include becoming an authorized user on someone else’s card (like a parent or partner) or using services that report rent payments to credit bureaus

How do I check my credit score?

If you have a credit card from a major bank, they often offer a free monthly credit score check as a perk. You can also check via services like Credit Karma or NerdWallet.

To dive deeper, you’re entitled to one free copy of your full credit report each year from each of the three bureaus at AnnualCreditReport.com. This is helpful if your score isn’t what you hoped—it lets you look for errors or issues to address.

Common Myths About Credit

Let’s talk some common myths about credit and credit scores that you might have encountered…

• "Checking my credit score will lower it" – False. Only hard inquiries (like applying for a loan) affect your score. Looking it up yourself is a soft inquiry.

• "You need to carry a balance to build credit" – Nope. Paying in full each month is the best move.

• "Avoid credit cards to avoid debt" – Not using credit at all can actually hurt your score over time.

So my credit score isn’t "good"—how do I change it?

First, look up your report and check for any errors, old addresses and in a worst case scenario, fraud. If you aren’t checking these, you might have something going wrong under your nose and have no idea.

Next, set your bills on autopay so you don’t rely on your memory or being on your game to make payments on time. If this stresses you out because you are in a bad habit of overspending before bills are due, you can consider setting up your bills to go out the day following when your paycheck comes in. The first time you do this, you might have to pay part of a bill early but the benefit long term is that you’ll be much clearer how much you actually have to spend, with full peace of mind that bills have been paid and you’re building your credit!

Next, focus on using less than 30% of your available credit - this can look like asking for an increased credit limit (without upping your spending!) or reducing the amount you put on your credit card and paying more things directly from your bank or in cash.

If you’re ready for more expert level, you can call to ask to have things removed from your credit history. If there was a late payment that you resolved within a day, you can call your bank or the credit unions to ask them to remove that from your report so it doesn’t affect you in the future. This works best if the mark is recent but you can remove older things if you’re persuasive.

Keep in mind, improving your score takes time. The metric is meant to judge your demonstrated trustworthiness and just like in personal relationships trust takes time to build! I’ve seen my credit score jump up by a few points just when I was using less of my available credit but the real gains will come over time when you have a longer credit history with negative marks.

Building good credit doesn’t have to feel overwhelming. Start small. Pick one action item from the checklist above and do it today. Whether it's checking your score or setting up autopay, those little steps will compound over time. And trust me—your future self will thank you when it’s time to get that apartment, car loan, or even a mortgage. You’ve got this!