Credit Basics
What is a credit score?
A number that shows how trustworthy someone is with borrowing money.
Which factor affects your credit score the MOST?
A. Credit mix
B. Payment history
C. New credit
D. Length of credit history
B. Payment history
What is interest?
Extra money paid back when borrowing money.
Name one way to start building credit.
Using a credit card responsibly or becoming an authorized user.
What happens if you miss a credit card payment?
Your credit score may decrease.
What is the normal credit score range?
A. 1–100
B. 300–850
C. 500–1000
D. 100–700
B. 300–850
What percentage of your credit score is based on payment history?
35%
Do people with higher credit scores usually get lower or higher interest rates?
Lower interest rates.
How does paying bills on time affect your credit score?
It improves your credit score.
True or False: Maxing out a credit card is good for your credit score.
False
What does a high credit score help you do?
Borrow money more easily and get lower interest rates.
What does “credit utilization rate” mean?
The percentage of available credit being used.
When is borrowing money a GOOD idea?
For important investments like education, a home, or emergencies.
Why is keeping old credit accounts open helpful?
It increases the length of your credit history.
What can happen if someone has a very low credit score?
Loans may be denied or have very high interest rates.
What is a “thin file”?
Little or no credit history.
What credit utilization rate is recommended for a healthy credit score?
A. Under 30%
B. Over 80%
C. Exactly 50%
D. 100%
A. Under 30%
True or False: Missing payments can increase loan interest rates.
True
How often should people check their credit report?
At least once a year.
Why is using too much of your available credit risky?
It increases your credit utilization rate and lowers your credit score.
Why is it important to build credit from a young age?
It helps people qualify for loans, apartments, and lower interest rates later in life.
Why can opening many credit cards at once hurt your credit score?
It makes lenders think you may be financially risky.
Why do lenders trust people with strong credit scores more?
Because they are more likely to repay money on time.
What should you do if you find an error on your credit report?
Report and dispute the error immediately.
What is one long-term consequence of bad credit?
Difficulty getting loans, apartments, or lower interest rates.