Credit 101

Credit scores have a lot of power, let’s get you in the excellent range. Understand what your score is, the factors that go into it and how to use credit wisely. We can help you learn how to maximize the benefits of credit cards while keeping you in the black.


FICO uses the following information to determine your credit score:

  1. Payment history is the most important aspect of your credit score, accounting for 35% of your total rating. Lenders want to know if you’ve paid your debt on time since it indicates how much risk they would be taking if they lend money to you.
  2. Amount owed accounts for 30% of your FICO score. It’s an essential part of your rating because it indicates how much of your available credit you’re using. If you’re using all the credit you have available; it tells lenders that your budget may be stretched to its limits.
  3. Length of credit history shows the age of your oldest and newest accounts, how long your accounts have been established, and how long it has been since you’ve used your accounts. The length of your credit history accounts for 15% of your FICO score.
  4. New credit accounts for 10% of your credit score and indicates whether you’ve recently opened several accounts within a short period. Opening too many new accounts is a red flag to lenders that tells them you may be high risk.
  5. Credit mix determines 10% of your FICO score and evaluates what combination of credit types you use, such as credit cards and specific types of loans and financing. If you successfully manage several types of credit over a period of time, it tells lenders that you are likely responsible when it comes to managing money.


Understanding your Credit Scores – What Your FICO Credit Score Means

  • 300 – 579  Very Poor: It’s unlikely that you’ll get approved for any type of credit. A very poor credit score makes you vulnerable to scams and traps such as payday loans and unreasonably-high interest rates that can keep you in debt, “underwater,” for years.
  • 580 – 669 Fair: At this level,  you’re considered a “subprime” borrower, and if you can get approved for credit through a legitimate lender, you’ll pay higher interest rates.
  • 670 – 739 Good: A score in this range tells lenders that you’re very unlikely to fall too far behind on your accounts since only 8% of people in this range become seriously delinquent on payments.
  • 740 – 799 Very Good: This credit score range is where you want to be to enjoy lower interest rates when borrowing. It also allows you to get better credit cards that offer cashback rewards and awesome travel perks.
  • 800 – 850 Exceptional: This is your ultimate credit goal. Building an exceptional credit score means you get the lowest interest rates and can expect approval in most credit situations.


A high credit score naturally means that you are good with making payments. Since it demonstrates to lenders that you are able to use credit in a responsible manner, you’re a worthy or low-risk candidate for extending credit. It encourages them to offer you the best credit card rates and benefits.


Since a low score indicates that you’re unable to make payments on time or even at all, naturally creditors are wary of extending credit to you. Given your likely history of missed payments, even if they do, it will be at a higher rate of interest to compensate for the high risk.


So, ultimately, in order to enjoy good credit rates and the best possible perks, you should aim to boost your FICO score to the high 700’s, so you can receive the best interest rates from lenders.

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