Credit Score Basics
What is a credit score used for?
It helps lenders determine your ability to repay loans and affects interest rates.
What percentage of your credit score is based on payment history?
35% (largest factor in FICO scores).
How does your credit score affect your loan interest rates?
Higher scores mean lower interest rates; lower scores mean higher rates.
What is one way to quickly improve your credit score?
Pay down credit card balances to lower utilization.
True or False: Your income directly affects your credit score.
False. (Income is not factored into your credit score, but it may affect your ability to get credit.)
What are the three major credit bureaus?
Experian, Equifax, and TransUnion.
How does your credit utilization ratio impact your credit score?
High utilization (using more than 30% of your credit limit) can lower your score.
What is the minimum credit score typically needed to qualify for a mortgage
Around 620 for conventional loans (varies by lender and loan type).
How long do late payments stay on your credit report?
Seven years from the delinquency date.
True or False: You start with a perfect credit score when you turn 18.
False. (You start with no credit score and must build credit over time.)
What is considered a "good" credit score?
Typically 670-739 (varies by scoring model).
Which impacts your score more: A missed payment or opening a new credit card?
A missed payment (has a bigger negative effect than a new account).
True or False: You need a credit score to take out federal student loans.
False. (Federal student loans do not require a credit check, but Parent PLUS and private loans do.)
True or False: If you dispute an incorrect negative item on your credit report, it must be removed immediately.
False. (The credit bureau must investigate first, which can take 30 days or more.)
What happens to your credit score if you only pay the minimum amount on your credit card each month?
It doesn’t lower your score directly, but carrying a balance increases credit utilization, which can hurt your score.
True or False: Checking your own credit score lowers your credit score.
False. (A soft inquiry does not affect your score.)
How long does a hard inquiry stay on your credit report?
Up to two years, but it impacts your score most in the first 12 months.
What loan type is most affected by your credit score?
Private loans, credit cards, and mortgages—interest rates are based on your creditworthiness.
If your identity is stolen, what should you do first to protect your credit?
Place a fraud alert on your credit report and report the theft to the FTC.
True or False: You should avoid using credit cards altogether to maintain a good credit score.
False. (Having and using credit responsibly builds credit history and improves your score.)
What is the difference between a FICO Score and a VantageScore?
Both measure creditworthiness, but FICO is more widely used by lenders and weighs factors differently than VantageScore.
True or False: Closing an old credit card will always improve your credit score.
False. (It can hurt your score by shortening your credit history and increasing utilization.)
What is a "subprime" borrower?
Someone with a low credit score (below ~600) who may face higher interest rates and stricter loan terms.
What is a "secured credit card," and how can it help your credit score?
A secured credit card requires a cash deposit as collateral and can help build or rebuild credit with responsible use.
What is one credit-building strategy for someone with no credit history?
Open a secured credit card, become an authorized user on a responsible person’s credit card, or take out a credit-builder loan.