One number shapes your apartment, your car loan and the interest rate you pay. Here's how it works, told as a short comic.
Owlthat's you
Foxthe landlord
The number everyone checks
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Owl wants to rent an apartment. Before saying yes, Fox, the landlord, looks up one thing: Owl's credit score. Banks, car dealers and card companies check it too.
How it works
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It's a number, usually from 300 to 850, that estimates how reliably you pay back what you borrow. Higher is better. On the most common scale, about 670 and up counts as good.
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Pay every bill on time. Your payment record is the biggest single part of the score.
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Use only a small part of your limit. A balance near your card's limit looks risky. A common rule of thumb is to stay under 30%.
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Give it time. A longer history helps, so the score grows slowly, like a tree.
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Don't apply for lots at once. Each new application can cause a small, short-lived dip.
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The payoff. A strong score makes it easier to get the keys, and often a lower interest rate too.
So, what is a credit score?
A three-digit number that sums up your credit report: how you've borrowed and paid back. Lenders use it to decide whether to say yes, and at what price.
What goes into the number
The most widely used score, FICO, publishes roughly how much each part counts. Other scores, like VantageScore, weigh things a little differently, which is why your number can vary between apps.
Three credit myths
These come up all the time, and all three are wrong.
"Checking my score lowers it." No. Checking your own score is a soft check and doesn't affect it."I should carry a balance." No. Paying your card in full each month is fine, and you avoid interest."Closing old cards helps." Often not. It can shorten your history and raise the share of credit you use.
Check your report, free. In the US you can get your credit reports from the three bureaus at no cost at AnnualCreditReport.com. Mistakes happen, and fixing one can matter more than any trick.
