How to Achieve a Good Credit Score

The Lantern

Credit impacts some of the most important parts of your life. Developing good credit may lead to more favorable financial options since having strong credit can make it easier to get a car loan, an apartment, a mortgage and even some jobs.

Your credit score is a snapshot of your overall credit history. When lenders complete a credit check, they’ll use your score – which can range from a low of 300 to a high of 850 — to help determine how likely you are to repay a loan in the future. The higher the credit score, the better a borrower looks to potential lenders, often leading to lower interest rates on mortgages, car loans, car insurance premiums and more. Lower interest rates could save you a significant amount of money over the course of your life.

Achieving a good credit score isn’t always a straightforward process, especially if you’re just starting to navigate your financial future, so here are some tips to help:

The basics of credit

Several factors contribute to your credit score, all of which are part of your credit history , including:

  • Payment history: Lenders will see if you’ve consistently made payments on-time. Late payments, whether to your bills, credit cards or other loans, can hurt your score.
  • Credit utilization: This value examines how much credit you’re using. For example, if you have an $8,000 credit card limit and a $7,500 balance, lenders could see this as a risk because you’re possibly spending more than your income.
  • Length of credit history: Credit agencies will review the length of time you’ve had your accounts. A longer credit history is better, but lenders often recognize that college students are just starting to build credit.
  • Credit mix: Having a variety of loans, credit cards or a mortgage is seen as beneficial. It shows you’re capable of managing multiple major purchases and paying them off. Stay smart about spending, however, and keep to a budget – you don’t want to take on debt just to earn a few points on your credit score.
  • New credit accounts: Creditors review how many new loans or lines of credit you’ve applied for or opened. Too many accounts can be a red flag that you’re spending more than you can pay on your own.

Lenders share information with three major credit bureaus — Equifax ® , Experian and TransUnion ® — who then calculate your credit score based on their own unique formulas. FICO ® and VantageScore ® also formulate credit scores from that data.

How to build credit

Now you know the importance of credit and how it’s measured, here’s how to start building yours.

  • Open a bank account: Although checking and savings accounts don’t factor into your credit score, lenders can review them to see how fiscally responsible you are.
  • Pay bills on time: Paying your utility bills, rent, credit cards and loans on time can also demonstrate fiscal responsibility to lenders.
  • Apply for a credit card: Used wisely, credit cards can speed up the process of building your credit. If you don’t have enough credit history to get a regular (unsecured) credit card, consider a secured credit card, which is tied to your bank account. Student credit cards and store-specific credit cards can also help you build credit.

Know the score

Managing your debts and paying your bills on time is key to establishing a good credit score. To keep a closer eye on your score, monitoring services are available and offer a way to stay aware of your credit situation without disruption. Chase Credit Journey ® is available for free and you don’t have to be a Chase customer to use it. It helps you build, manage and protect your credit and identity, thus helpful toward building great credit.

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The Lantern is the independent, award-winning student voice of Ohio State, covering sports, campus, politics, and arts and life.

Columbus, OH

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