Lesson 06 of 07
Understanding your credit score
A credit score is not a grade on your character and it is not a measure of your income. It is a lender's guess about how reliably you pay back, built from five things in your report.
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The short version
- Two factors are most of it. Payment history is about 35% and amounts owed about 30%. Everything else is smaller than most people assume.
- Utilization is balance divided by limit. Under 30% is the usual target, under 10% is better, and it is measured when the statement closes — not when you pay.
- Checking your own score is free and harmless. That is a soft inquiry. Applying for new credit is a hard inquiry, and it can cost a few points.
- Errors are common, and fixable. You can get free reports and dispute mistakes in writing. Closing your oldest card usually hurts: it shortens your history and cuts your available credit.
Two habits — pay on time, keep the balance low — do more than any trick sold online.
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Six questions on the video.
Watch first, then take the quiz on its own page. Four right is a pass, and your best score is kept in this browser.
After this: Lesson 07, Investing and risk