Main content
What is a credit score?
A credit score is a number that reflects how responsible a person is with borrowing and repaying money. Banks use this score to decide if they should lend money and what kind of interest rate they should give you. Created by Khan Academy.
Want to join the conversation?
How do we maintain our credit score when it is already high? And how do we get a good credit score at a young age?(6 votes)
Those are two questions. Let's take them in order.
"How do we maintain our credit score when it is already high?"
Make your payments on time, whether that means paying off your balance every month or taking longer and paying interest, "On time" is the thing that maintains your score.
"How do we get a good credit score at a young age?" Get a job and stay in i t. Get a credit card, use it and pay what you owe on time. Your credit score stands in for many things that don't involve money. It represents your dependability to employers and landlords.(16 votes)
I don't have a question.(8 votes)
I don't have an answer to this question(6 votes)
Is there a Poor, Fair, Good, and Excellent on the credit score?(2 votes)- Your score is a number.
a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2021, the average FICO® Score☉ in the U.S. reached 714—an increase of four points from the previous year. Higher scores can make creditors more confident that you will repay your future debts as agreed. But creditors may also set their own definitions for what they consider to be good or bad credit scores when evaluating consumers for loans and credit cards.(11 votes)
Does anybody know what a lease is?(3 votes)- A lease is a contract that obligates you as a renter to a fixed schedule and length of time before things can be renegotiated. During the term of the lease, your rates cannot be increased. If you were simply renting, not leasing, things could change at the owner's whim.(8 votes)
Is the credit score only available in America? Do other countries also use a credit score?(4 votes)- The entire credit score discussion in these lessons is specific to the USA. Some other countries have similar systems, but a credit score from one nation does not transfer to another.(3 votes)
- Do I have to have a credit card? I mean tbh credit cards sound so dumb, like wow you can spend money if you pay it back a few weeks later big whoop. I suppose it could be helpful in case you need to pay for something but can't afford it until you get your paycheck, but then what if you don't have enough money left in that paycheck for future payments or an emergency happens and you don't have enough saved up? Even if it can be helpful, I'd rarely want to use it, but don't credit cards cost money? Wouldn't I just be paying for something I barely use? It honestly sounds like it was made to trick people into debt. I have a feeling there is some way where you almost have to have a credit card, but I'd really like to live without one if possible. Even if it's my only way to get through a payment, I'd rather go without than go into unending debt.(2 votes)
- 1) You don't have to do anything you don't want, and that includes brushing your teeth.
2) Life became much more manageable for me when I learned how to use a credit card.
3) If you have faith that you'll be getting paid within the next several weeks, or steadily for the next year, then a Credit card is manageable, and it opens your options. But that takes faith, and if you live without that kind of faith, you'd better stay away from credit.
4) Go ahead and live without a credit card, but you'll find life a LOT more manageable with one of them in your pocket.(5 votes)
- a credit score is good(3 votes)
- You want a good one. Closer to 800 than to 300.(3 votes)
I recall having been told to pay for things in full if possible and not to use a credit card.(2 votes)
A credit card should not be used if you don't have the money and would be in debt to have something. Ideally, you would not pay a penny in interest on a credit card.
Credit cards are helpful for your credit score but should only be used if you have the money and can use it responsibly.(4 votes)
- How do I get from 750 to 850 credit score?(3 votes)
- Why do you need that? At 750, any employer who would consider hiring you, landlord who would consider renting to you or lender who would consider lending to you will say, "OK". To strive for the highest number for the sake of your vanity would only be to serve your vanity. You have better things to do with your energy and time. Focus on those.(2 votes)
- What is a good bank to start your financial journey?(2 votes)
- Your neighborhood bank might be a friendlier place to start out. Unless you're going into business, it may be enough for everything you ever need.(4 votes)
Video transcript
- Your credit score is a measure, some would argue an imperfect measure, of how likely you are to pay for things on time. Let's say you were to take a loan. How likely are you to pay, make the payments on that loan? If you were to get a
lease on an apartment, how likely are you to pay rent on time? Now, there are three credit bureaus. They are TransUnion,
Experian, and Equifax, and what happens is, is let's say that you have a credit card and as you pay that credit card, pay the balance, or pay the minimum payment on time, or you don't pay on time, that gets reported to these bureaus. These bureaus use an algorithm that comes from a company called FICO. It used to stand for
Fair Isaac Corporation, and that gives you a score, and each of the three bureaus will have a score between 300 and 850. If you have a score near
the high end of that range, if you're in the high 700s or above, that is an excellent credit rating. People will give you loans. It will be easy for you to lease things, and not only when you get that loan, it will actually be at
a lower interest rate. If your credit score is in
the 600 to low 700 range, that's decent, you're probably okay, although you might, in certain cases, have to pay a higher interest rate than the people with the excellent credit. And then if your credit
score is in the low range, which would be anywhere from
300 to say the high 500s, you're going to have
trouble getting a loan, or in many cases getting a lease, or even if you do, you're going to have to
pay a higher interest rate. Now, the ways to get as high
a credit rating as possible, is pay your bills on time, pay your rent on time, have a long credit history. It's good to have credit. So it's good to have a credit
card that has a high limit, but to use as little of that as possible. So good luck (laughs)
with your credit scores.