Between classes, exams, and having a social life, credit might not be top of mind – but it should be. Your credit score can impact everything from renting an apartment, to getting a loan, or a job after college.
Lenders, employers, and landlords use it to quickly access how responsible you are. If you’re unsure what goes into a credit score, now’s the time to find out! A little knowledge today can lead to big benefits down the road.
- Payment History (35%). Paying bills on time is the best way to build and maintain good credit. More than a third of your credit score is based on this simple habit.
- Amount Owed (30%). How much you owe accounts for almost a third of your credit score. Even if you always pay your bills on time, high balances or large amounts of debt can hurt your score. Think carefully before overusing credit cards or borrowing extra student loan money.
- Length of Credit History (15%). This is a reflection of how long you’ve had established credit and the average ages of your accounts. The “length of credit history” factor is one of the reasons some students open credit cards in college – to establish credit at a young age. But before taking this step, take a realistic look at yourself and your financial situation. If you can’t handle the responsibility of paying it off in full each month and on time, it may not be worth it. Missed payments and high balances can seriously hurt your credit. Plus, paying interest on purchases that you can’t pay off in full is an expensive habit.
- Credit Mix (10%). There’s a difference between revolving credit and installment loans. Revolving credit is credit that is available to you on an ongoing basis. When you spend a portion of it, it becomes unavailable until you pay it back. Once it’s paid back, it’s available again. A good example of this is a credit card. Installment loans are debts that are paid off in set monthly payments. The money doesn’t become available again after you’ve spent it. The most common examples of these are student loans or car loans. Installment loans are typically seen in a more positive light than revolving credit. The types of credit that you use impact this portion of your score.
- New Credit (10%). You should avoid opening multiple accounts over a short period. Each new account impacts your credit score. The exact impact may depend on the type, dollar amount, and number of new accounts, but overall, borrowers who have opened several new accounts in a short period of time are seen as riskier to lenders.
The most important thing to remember is that what you do now will impact your credit score both now and in the future. Based on your financial choices, it will become easier or harder for you to reach your future goals, so take the time to get informed and choose wisely. PSECU members can stay on top of their credit score by enrolling in our free credit score service*. You need only PSECU’s checking or a loan to be eligible.
One of the challenges college students and others face is needing credit history to even GET a credit card. If this sounds like you, consider the PSECU Secured VISA Card. There are no application or annual fees, plus the required collateral is $200 or 25% of credit limit (whichever is higher). To learn more and apply, click here.
Find more money management tips and resources on our Resource Center page.
*PSECU is not a credit reporting agency. Members must have PSECU checking or a PSECU loan to be eligible for this service. Joint owners are not eligible.
*PSECU is not a credit reporting agency. Members must have PSECU checking or a PSECU loan to be eligible for this service. Joint owners are not eligible.