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Credit
Credit Scores Explained
Decode your credit score ā what it is, how it's calculated, and how to build great credit as a teen.
6 min read Earn 70 XP 4 sections
1
What is a credit score?
A credit score (300ā850) is a number that tells lenders how likely you are to repay debt. Higher = better terms on loans, credit cards, even apartment rentals. It affects your financial life more than most people realize.
2
The 5 factors (FICO)
ā¢ 35% Payment history ā do you pay on time?
ā¢ 30% Credit utilization ā how much of your limit do you use?
ā¢ 15% Length of credit history ā older = better
ā¢ 10% New credit ā recent applications
ā¢ 10% Credit mix ā variety of accounts
ā¢ 30% Credit utilization ā how much of your limit do you use?
ā¢ 15% Length of credit history ā older = better
ā¢ 10% New credit ā recent applications
ā¢ 10% Credit mix ā variety of accounts
Never miss a payment. It's the single biggest factor.
3
Building credit as a teen
You can start at 18 with a secured card (deposit = limit). Or ask a parent to add you as an authorized user on their card ā you inherit their history. Either way, keep utilization below 30% and always pay the full balance.
Example
Use the card for a $20 Spotify subscription. Pay it in full every month. After a year, you'll have a real credit history.
4
Myths debunked
ā "Checking your own score hurts it" ā False. Soft inquiries don't count.
ā "Carrying a balance helps" ā False. Pay in full. Always.
ā "You need a lot of credit cards" ā False. One well-managed card is perfect.
ā "Carrying a balance helps" ā False. Pay in full. Always.
ā "You need a lot of credit cards" ā False. One well-managed card is perfect.
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Lesson complete!
You've earned 70 XP. Test what you learned with the quiz.