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6 Quick Facts To Make Sense Of Credit Scores

Thinking about opening a line of credit? Find a plan based on how you spend by using Chase Credit Journey®.

1. A credit score is a number that represents your credit worthiness or reliability as a borrower.

So basically, lenders look at that number for insight into what your spending habits are like. What's most important to them, obviously, is if you reliably pay back what you borrow. It also allows them to evaluate other factors such as your payment history, the length of your credit history, how much credit you are using, and your total debt. Think of it like a GPA for your money moves!

young woman holding a credit card in front of a laptop for online shopping

2. Your credit score is determined by major scoring systems that financial institutions use to measure your credit worthiness.

It's not the banks that determine that number! Financial institutions rely on two major scoring systems, VantageScore and Fair Isaac Corporation (FICO), to calculate that. As an example, VantageScore uses six categories to calculate its scores and the result is a three-digit number. The score ranges from 350 or so to above 800, depending on the model. If your number is above 720, it's considered "good" or "exceptional" credit. Anything under 720 is "fair" and can mean you will be limited in your options or may pay higher interest rates.

3. Paying on time, the types of accounts you have, and how long they have been open are key.

It's not just paying bills on time that improves your score; although it’s a big piece of the score mix. Scoring systems also look at the different types of accounts, whether they're auto or student loans, credit cards, or mortgages. They also look at how long your accounts have been open.

4. Watch the usage!

Just because your credit card has a limit of, say, $15k doesn't mean you should use all of it. The amount of credit you use is called your "credit utilization" and it is very important in calculating your score. VantageScore® recommends keeping your balances under 30% of your total credit limit.

Smartphone showing credit score on a screen

5. Don't go overboard with signing up for credit applications.

Diversity in your credit portfolio is important but try to spread out your applications vs. signing up for ALL the cards at once. Opening up a bunch can lead to multiple lenders doing a "hard" inquiry on your credit, which can ding your score. These inquiries “pull” your credit report info to examine your financial history and help lenders predict future behaviors. These could lower your score because they signal to lenders that you may be taking on too much debt.

6. Keep an eye on your score.

Check your score regularly to help monitor your credit activity. An easy way to do so is signing up with Chase Credit Journey. Best part is you do not need to be a Chase customer; it's free for everyone! You'll get updates and alerts on your score on a weekly basis without affecting it. It also offers free identity monitoring. This will help inform you of any "sus" activity that may have happened on the dark web or if your data, such as your Social Security number, has been breached. 

All facts provided by Chase.

With Chase Credit Journey you can manage, monitor, and protect your credit score with alerts, round-the-clock customer support and free identity monitoring. Your credit score is updated at least weekly and every time there's a change to your report, keeping you up to date on exactly where you stand.