Notes

- The biggest percentage of your credit score comes from your payment history from the past seven years. Are you paying your loans on time? Have you recently defaulted on an account? It’s a major indicator to lenders as to whether or not you’re trustworthy.
- The second largest is credit utilization. If you use a lot of your available credit, then that means more loans that lenders can lend out, and the higher this score.
- Of course, recent financial records count a lot more than those in the past. Your history of good credit will mean little when, in the past few months, you’ve been missing all of your payments.
- Speaking of payments, applying for many new loans in a short amount of time can lower your credit score. Any loan inquiries stay on your history for 12 months, or a single year.
- And many different kinds of loans on your financial record can have a positive influence on your credit score.
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- After calculating the percentages from each part, it’s shown as a cumulative score. This cumulative score is the key whether or not you can get a loan. It starts at 300 (not zero) and goes up until 850.
- Every website has their own opinion of what is good or bad, but here is a good rule of thumb: 700-850 is a good credit score, 700-650 is average credit, and 650-300 is a bad credit score.

And what harm can a bad credit score do? Well…
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- Missing payments is the easiest way to hurt credit score. Being able to pay on time, even paying more than needed, is crucial to keeping your credit score high. If you miss even one payment, it can last on your record for many years and make you seem very untrustworthy to future lenders.
- On the flip side, using too much money could hurt your credit a lot. Overspending on credit cards (revolving credit), any more than 30% (available credit) can be detrimental to your credit score. If you max out a credit card, then you’ve used more than all of your available credit (account defaults). Thankfully, this is one of the easiest to bring back under control, as you just need to pay off some of your credit card debt. However, you have to be wary when your revolving credit becomes close to the available credit, as when you reach your max amount of available credit, you account balance is set to 0. Closing accounts also lowers your available credit too, so be mindful if you’re thinking of doing that.
- Applying for a lot of credit in a short amount of time can make lenders suspicious and make you seem like you are struggling financially. They’ll refuse to give you any more loans until time has passed. Usually about six months in between, and if you have to apply for multiple loans in less than six months, be prepared to take a hit in you credit.
- Defaulting on accounts - or a failure to repay a loan - hurts your credit score immensely. After failing to repay a number of loans, you’ll get a two weeks notice to catch up on any missing payments. If you don’t repay in that time frame, your account gets defaulted. Not only does it hurt your immediate credit score, it signals to others in the future that you can’t repay them and will be wary to give you a loan.


Now, if you do enough of the items on this list, or manage to do all of them in one fell swoop, you’re probably in some kind of debt. [next slide]