•  Your credit report is like your financial resume.

•  It’s important to build your credit at an early age.

•  You can increase your credit score by making payments on time.

•  A high credit score will get you lower rates on loans and save you money over time.

Getting Started

Your credit report is the foundation of your financial life. Think of it as your financial resume. It keeps track of every debt you’ve ever had – including credit cards, student loans and auto loans – as well as your payment history. If you show a history of making payments on time, your credit score will go up. And the higher your score, the better rate you’ll get on student loans, credit cards, and eventually your mortgage – saving you a ton of money in the long-run.

Nearly every American adult has a credit report and score. These are established when you get your first financial product, typically a credit card or student loan (for most people, when they enter college). You don’t need to pay back your student loans until you graduate, but paying your credit card bill on time every month is key.

 The higher your score, the better rate you’ll get on loans – saving you a ton of  money in the long-run. 

Why You Should Care About Your Credit Score

A high credit score helps you save money in nearly every aspect of your financial life. It can help you get a rewards credit card that will pay for your next trip. It allows you to get a low interest rate on a personal loan or auto loan, and will help you refinance your student loans to a lower rate. When you’re ready to buy a house, a high credit score will get you a better rate on your mortgage.

A credit score is a black box to a lot of people – they know it’s important but they’re not clear on what goes into it. What are the factors that contribute to your score? What details are included in your credit report, and how do you access it? We’re here to break it down for you.

Key Factors In Your Credit Score

  • On-Time Payments
  • Credit Utilization
  • Age And Number Of Accounts
  • Credit Inquiries
Credit Karma - Free Credit Score

On-time Payments

Paying your bills on time is the most important thing you can do for your credit score. Unless you have a credit card with a 0% interest rate, it’s best to pay off the full balance every month to avoid any interest fees. However, if you just make the minimum payment each month, this will count as an on-time payment.  

Even one missed payment can have a detrimental effect on your credit score and take years to make up. Remember to always make your payments on time, and if possible even before your bill is due. If you’re prone to forgetfulness, set up auto-pay or a recurring reminder so you’ll always be on point.

Paying your bills on time is the most important thing you can do for your credit score.

Credit Utilization

Credit utilization is the percentage of your available credit that you use, and is primarily determined by your credit cards, It’s the ratio of how much you owe compared to your credit card limits. For example, if you spend $300 on a credit card with a $1,000 credit limit, your credit utilization is 30%.

Credit Utilization = Your total credit card balances / Your total credit card limits

It’s best to keep this percentage low, either by opening more credit cards (which will increase your available credit) or by reducing the amount of outstanding debt you have on the credit card. 

Age and Number of Accounts

One of the biggest mistakes people make is not understanding the importance of building credit at a young age. The earlier you establish a credit history, the better, because the age of your accounts is another factor in your credit score. The logic behind this is that the longer your accounts have been open, the more time you’ve had to show that you’re capable of paying off your debt.

The number of accounts follows similar logic. It just shows that you have a longer track record of being good with credit. Don’t worry if both of these numbers are low starting out. These don’t have as much weight as on-time payments and credit utilization, and the age and number of accounts will naturally increase over time.

Number of Inquiries

You receive an inquiry on your credit report when you apply for a financial product – typically either a new credit card or loan. Getting a student loan from the federal government will not result in an inquiry though, since they do not lend based on credit risk. You should generally avoid applying for a lot of credit all at once, since several inquiries in a short period of time can hurt your credit score. 

How to Check Your Credit Score

Now that you know why your credit score is so important, and the factors that determine it, you may be wondering how to find your credit score. Our partner Credit Karma provides a free website and mobile app that allows you to monitor and manage your credit report. You can find your free VantageScore from Transunion and Equifax, and they even have a Simulator tool that shows you how certain actions will affect your score. You can dispute any items that are incorrect directly through CreditKarma.com

You can also access all three credit reports from the major credit bureaus (Transunion, Equifax, and Experian) for free once a year at annualcreditreport.com. However, beware that the bureaus will charge a monthly fee for more frequent access. For this reason, we recommend using Credit Karma, since you can access and monitor your credit score at anytime for free. I’ve shared my score from Credit Karma below.

Credit Karma score

See, finding and managing your credit score is easier than you might have expected. If you’re less-than-impressed after checking your score, that’s okay – once you start keeping track and working to improve it, you’ll be in the 700s in no time.

Plus, the Student Loans Guy is here for you! We’ll help you save money on your loans, earn more rewards, and roll your way to riches. It all starts with managing your credit score.


  • Credit reports and scores are like your personal finance resume.
  • It’s important to establish and build your credit at an early age.
  • Increase your credit score by making payments on time and using less than 30% of your available credit.
  • Maintaining a high credit score will allow you to get lower interest rates on loans and save you a lot of money over time. 

Disclosure: Student Loans Guy is a free site that provides unbiased information on financial products. In order to keep the lights on, we are compensated when you get a product from one of our partners. Part of this goes to the Student Loans Guy Scholarship and allows our site to always remain free to our readers.

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