Credit Scores 101
Credit scores play a big role in your financial future. Good credit can help you get approved for a loan, a car, or an apartment. Not to mention, your credit score can also determine how affordable your rates are on a mortgage, car loan, insurance, and more. The word "credit" can seem overwhelming, but Perpay is here to help. We've broken down the basics below.
What Is a Credit Score?
The Consumer Financial Protection Bureau defines a credit score as "a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports."
What Factors Go Into Your Credit Score?
Common factors that go into your credit score include:
Payment History. Paying on time each month shows responsible financial behavior. This is the biggest factor in your score.
Credit Utilization. This is how much credit you're using compared to your total limit. Keeping your utilization low, and trending it downward over time, can help your score.
Credit Mix. Having a mix of credit cards, loans, and retail accounts can help your score.
Depth of Credit. The longer your credit history, the more lenders can learn about your track record. Establishing credit early gives you a longer history over time.
New Credit Applications. Applying for several lines of credit in a short time can look “risky” and may lower your score.
Learn more about the factors behind your credit score.
What is a Credit Bureau?
Credit bureaus are companies that collect and maintain information about your borrowing and repayment history, including loans, credit cards, and payment patterns. They use this data to compile your credit reports, which lenders and creditors rely on to calculate your credit scores and assess your creditworthiness.
There are three main bureaus that report information about your credit:
Experian
Equifax
TransUnion
How can you check your credit score?
Many credit bureaus offer a free credit report each year, so you can monitor your standing. Checking your report regularly helps you catch errors, identity theft, or anything inaccurate that could affect your score.
For more on accessing your credit reports, visit the Consumer Financial Protection Bureau.
How can you start building credit?
Understanding what goes into your score, how to check it, and how to build it is a great first step. Knowing where to go from there can be more of a challenge.
Perpay makes credit building easy, and helps you build credit that lasts. For just $5 a month, your Perpay spending limit (up to $1,000 on average) will be reported to the three major credit bureaus.* You can use that spending limit to shop in the Perpay Marketplace, so you’re gaining access to spending power while you build credit.
*The credit score (VantageScore 4.0) increase of 30+ Points is based on the average of approximately 50,000 Perpay+ customers with a baseline credit score of 550 or below during the first year of reporting. The same group observed an average credit score increase of 55 points over a two-year period if they maintained on time payments both on and off Perpay’s platform. Credit score improvement is not guaranteed, and individual results may vary based on a number of factors. Perpay will report your transactions to Experian®, Equifax®, and TransUnion®. On-time payment history can have a positive impact on your credit score. Late payments may result in payment reporting to credit bureaus that may negatively impact your credit score. This product will not remove negative credit history from your credit report. Perpay+ is only available to eligible Marketplace account holders. Fees apply. See the Perpay Terms and Conditions for more details.
Perpay does not provide financial, legal, or regulatory advice. The content is for general informational purposes only. Any views expressed are those of Perpay, not its partner institutions. We do not endorse or guarantee the accuracy of any linked third-party information. Links to Perpay products are advertisements. All external brand names belong to their respective owners.