Credit Basics
What does your credit limit tell you?
The maximum amount you can charge on your credit card.
What percentage of your score comes from your payment history?
35%
What is “credit utilization”?
The percentage of your credit limit that you’re using.
What is meant by “credit age”?
The length of time you’ve had open credit accounts.
What’s the difference between a soft and hard credit inquiry?
Soft doesn’t affect your score (like checking your own credit); hard does (like applying for a loan).
What does APR stand for and what does it mean?
Annual Percentage Rate – the interest charged if you don’t pay your balance in full.
How long can one late payment stay on your credit report?
7 years
What’s the maximum recommended credit usage percentage?
What’s the maximum recommended credit usage percentage?
Why should you keep older credit accounts open?
Older accounts boost your credit history and show reliability.
Does checking your own credit report hurt your score?
No
What happens if you only make the minimum payment every month?
You’ll pay more interest and stay in debt longer.
How does credit utilization affect your score?
High utilization can lower your score; keeping it low shows responsible use.
What’s one smart way to reduce your credit utilization ratio?
Pay off balances before the statement closes or ask for a credit limit increase.
What’s the effect of having mostly new credit accounts?
It lowers your average credit age and can hurt your score.
What can happen if you apply for multiple credit cards in a short time?
Your score may drop due to multiple hard inquiries.
What’s the benefit of the grace period on a credit card?
You can pay off your balance without interest during this time.
Why does closing an old credit card hurt your score?
It shortens your credit history, which lowers your average credit age.
What could happen if you max out your credit card?
Your score could drop due to high credit usage.
How does keeping credit cards for a long time help your score?
It shows long-term, responsible credit use.
What is a secured credit card and how does it help build credit?
It requires a deposit and helps establish or rebuild credit through on-time payments.
What’s the golden rule for avoiding credit card interest?
Pay your full balance every month.
What three factors make up a strong credit score?
On-time payments, low credit usage, and long credit history.
Why is using less than 10% of your credit limit even better than 30%?
It shows excellent credit management and boosts your score even more.
What strategy can you use to maintain a healthy credit age?
Keep old accounts open and limit new ones.
What should you consider before opening a new credit account?
Whether you really need it, and how it affects your score and financial goals.