Financial Literacy 101: Understanding Credit

Use it don’t abuse it.




  • What is a credit score?
    • 3-digit number that provides a snapshot of your credit worthiness.
    • Indicator of how well you use your money.
  • What is a credit report?
    • A summary of your credit history.
    • Comprises your diverse credit file.

Factors of a Credit Score

  • Payment History
    • Makes up 35% of your FICO Score.
    • Indicates whether you’ve paid your bills on time.
  • Amount Owed
    • Makes up 30% of your FICO Score.
    • Credit Utilization Rate: Percentage of the available credit on your credit cards that you’re using at any given time.
  • Length of Credit History
    • Makes up 15% of your FICO Score.
    • How long you’ve been using credit and average age of your credit accounts.
  • New Credit
    • Makes up 10% of your FICO Score
    • Number of credit accounts opened recently. Hard credit inquiries made on your account within last year.
  • Credit Mix
    • Last 10% of your FICO Score
    • Composition of different types of credit in your history
      • Ex: Credit cards, Student Loans, Auto Loans, Mortgage, etc.

How to Maintain Good Credit

  • Pay those bills on time – don’t play around!
  • Pay down your credit card balances.
    • Try to keep a credit utilization rate below 30%.
  • Avoid that RETAIL THERAPY!!! Not with that credit card.
  • If possible, pay off your balance each month.
  • Calculate the number of months to pay in full.


  • Where can I learn more about this?
  • Do you start off with good credit?
    • No! Everyone has a different journey, so there’s no standard score.
    • You don’t start off with a score of 0, you just don’t have any credit.
  • When should you start building your credit?
    • Whenever you can maintain and evaluate your needs.
    • Ideally now. Building your credit takes time, so now is a great place to start learning and developing good money habits. You can’t build credit instantly so its best to plan ahead so that its already there when you need it.

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