Understanding Your Credit Score

One of the easiest ways to think about credit reports and credit scores is by comparing them to school assignments and grades. It is especially important for high school students to understand that they do not have a “beginning” credit score. Think about it like this, in school students are given an assignment, in which they complete and turn in for a grade. In credit terms, an individual’s credit report is like the student’s assignment and the credit score is like the grade. The grade represents the quality of work in the student’s assignment. In a similar way, a credit score represents the quality of an individual’s credit report based on their creditworthiness to lenders.

In essence, students cannot have a grade until they complete the assignment and submit it for a grade. Similarly, in order to have credit score calculated, individuals must have a credit report. If they have never had credit issued in their name, they would not have a credit history, and credit scores could not be calculated. Credit scores weigh all of the information in a credit report. Positive account information helps improve the score, negative information hurts it. The impact of any one element is dependent on its relationship to everything else in the credit report.

It is never too early to start learning about your credit score. You may start by requesting a free credit report (link below) to get a good idea of where you stand in terms of credit risks.

Useful Links:

Request a free credit report: https://www.annualcreditreport.com/index.action

What is my Credit Score: http://www.consumerfinance.gov/askcfpb/315/what-is-my-credit-score.html