Sample lesson · Beginner Investing

What a Credit Score Is, and Why It Follows You for Years

6 min read · Beginner · One of 404 lessons

What this lesson is about

2 parts · a quick check after each · then the quiz

Part 1 of 2

A, three-digit, number, you, never, see, anyone, calculate, is, quietly, deciding, what, interest, rate, you'll, pay, on, your, next, car, loan,, whether, a, landlord, approves, your, apartment, application,, and, sometimes, even, what, you, pay, for, car, insurance., That's, your, credit, score,, most, commonly, a, FICO, score,, ranging, from, 300, to, 850,, built, from, the, credit, history, in, your, reports, at, the, three, major, credit, bureaus:, Equifax,, Experian,, and, TransUnion.

A, FICO, score, is, built, from, five, weighted, factors:, payment, history, (about, 35%., Whether, you've, paid, bills, on, time),, amounts, owed, (about, 30%,, how, much, debt, you're, carrying, relative, to, your, available, credit),, length, of, credit, history, (about, 15%),, new, credit, (about, 10%., How, often, you're, opening, new, accounts),, and, credit, mix, (about, 10%., The, variety, of, credit, types, you, manage).

What a credit score is made ofTwo factors are two thirds of it, and you control both.

Quick check

What is the standard range for a FICO credit score?

Part 2 of 2

Insider, Angle:, the, phrase, "follows, you, forever", isn't, much, of, an, exaggeration., Most, negative, items,, like, a, late, payment, or, a, collections, account,, stay, on, your, credit, report, for, roughly, 7, years, under, U.S., credit, reporting, rules,, and, a, Chapter, 7, bankruptcy, can, stay, for, up, to, 10., That's, why, a, single, missed, payment, made, at, 19, can, still, be, quietly, affecting, loan, offers, at, 26., On, the, flip, side,, the, system, rewards, patience:, length, of, credit, history, is, a, real,, weighted, factor,, which, is, exactly, why, financial, advisors, often, recommend, keeping, your, oldest, credit, card, open, and, active, even, if, you, rarely, use, it., Closing, it, can, shorten, your, average, account, age, and, lower, your, score.

Try, This:, If, you're, old, enough, to, check, your, own, credit, report,, use, one, of, the, free, tools, available, (like, AnnualCreditReport.com,, the, only, site, authorized, by, federal, law, to, provide, free, credit, reports, from, all, three, bureaus), and, see, what's, actually, on, file, for, you., If, you're, not, old, enough, yet,, ask, a, parent, to, walk, through, theirs, with, you.

Quick check

Which single factor carries the most weight in a typical FICO score calculation?

That's one of 404

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