Financial Literacy 101: Understanding Credit

What is a credit score?
- 3-digit number that provides a snapshot of your credit worthiness.
- Indicator of how well you use your money.
What is a credit report?
- A summary of your credit history.
- Comprises your diverse credit file.

Payment History
- Makes up 35% of your FICO Score.
- Indicates whether you’ve paid your bills on time.
Amount Owed
- Makes up 30% of your FICO Score.
- Credit Utilization Rate: Percentage of the available credit on your credit cards that you’re using at any given time.
Length of Credit History
- Makes up 15% of your FICO Score.
- How long you’ve been using credit and average age of your credit accounts.
New Credit
- Makes up 10% of your FICO Score
- Number of credit accounts opened recently. Hard credit inquiries made on your account within last year.
Credit Mix
- Last 10% of your FICO Score
- Composition of different types of credit in your history
  - Ex: Credit cards, Student Loans, Auto Loans, Mortgage, etc.

Pay those bills on time – don’t play around!
Pay down your credit card balances.
- Try to keep a credit utilization rate below 30%.
Avoid that RETAIL THERAPY!!! Not with that credit card.
If possible, pay off your balance each month.
Calculate the number of months to pay in full.

Where can I learn more about this?
- Tuesday, March 26th, BU SFS is hosting a Credit 101 Webinar from 6-7PM.
Do you start off with good credit?
- No! Everyone has a different journey, so there’s no standard score.
- You don’t start off with a score of 0, you just don’t have any credit.
When should you start building your credit?
- Whenever you can maintain and evaluate your needs.
- Ideally now. Building your credit takes time, so now is a great place to start learning and developing good money habits. You can’t build credit instantly so its best to plan ahead so that its already there when you need it.