For most young adults, credit is an abstract concept. How exactly can a number help the electric company decide if I need to pay a deposit? How can a single report help banks, car dealerships, and credit card companies decide whether they’re going to loan me money?
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Put simply, your credit report is an overview of your debt accounts (or lack thereof) and how you’ve paid them. According to Credit Karma, a credit report focuses on five areas. From most to least important, these factors are
- Payment history – Have you paid on time?
- Credit usage – How much of your available credit are you using?
- Length of credit history – How long have you had credit?
- Credit mix and types – Do you have a variety of accounts?
- Recent credit – How many hard inquiries have you had recently?
Your credit score is a numerical assessment of these factors. Scores range from 300 to 850. Different lenders evaluated scores in different ways, but here are the general guidelines:
Poor | 300 – mid 600s |
Fair to Good | Mid 600s – mid 700s |
Very Good to Excellent | Mid 700s – 850 |
Credit Resources
How to Build Good Credit: A Beginner’s Guide
A Beginner’s Guide to Improving Your Credit Score