Millennials: Do You Know Your Credit Score?


Personal Finance
Credit scores may be a boring, dry topic, but the reality is that having an excellent credit score can save you money! Get a 101 on credit scores here.

It’s a simple question with huge implications. Your credit score tells lenders whether or not to lend to you.

It also determines what kind of interest rates you’ll receive on any loans you apply for (car and mortgage, most importantly). It can determine whether or not you get an apartment. It can even determine whether or not you get hired.

If you haven’t realized how important your credit score is before, now’s the time to find out! It might seem like a boring subject, but knowing what information is used to determine your score, and what that number really means, can make an enormous difference for your financial well-being.

If you have any financial goals you might need to finance, knowing your credit score is a must. Let’s dive in.

Finding Out What Your Credit Score Is

First of all, let’s make the distinction between a credit score and credit report. A FICO credit score is a number between 350 and 850. The higher the number, the more creditworthy you are. The lower the number, the riskier you appear.

A credit report is a history of your credit. If you’ve applied for any loans, credit cards, or other forms of credit, they will all show up on your credit report. Your payment history also shows up here, along with your personal information.

It’s important to review both. Your number will give you an indication of where you are on the spectrum, but your report will break down why your credit score is what it is. It’s also a good idea to review your report in case of discrepancies. Yes, your report may have mistakes on it!

If you’re interested in reviewing your free credit report right now, you can go to and choose which of the three credit bureaus’ reports you’d like to see. Each is free, so if you want to monitor your report, you can order one every four months.

Getting your FICO credit score for free is possible, but keep in mind that there are 3 credit bureaus (TransUnion, Equifax, and Experian). Each use different algorithms to determine your score, so depending on where you check, the number may be different.

More and more companies are making their customers’ credit scores available for free. If you have a bank account or a credit card account, check online to see if yours is available.

Also, be wary of sites like and While they’ll give you an estimated credit score, they’ll also try and recommend financial products, like credit cards, to you. That’s the way they make money, so don’t take them as genuine recommendations.

How Your Credit Score Is Determined

Knowing what factors go into determining your credit score can help you figure out what aspects of your credit you can work toward improving.

Here’s what’s taken into consideration, from most important to least important:

Payment History: Are you guilty of making late payments on any bills? That’s not good, and it can really hurt your credit score. Paying on time is the best thing you can do.

Amounts Owed: This refers to the amount of credit you’re currently using and the amount available. Let’s just say you have a card with a $10,000 limit. If you’re carrying around a $2,000 balance, that looks much better than if your balance is $8,000.

Length of Credit History: Did you get your first credit card when you turned 18? Or did you just apply for your first credit card within the last year? Length of credit history matters. The more “experience” you have, the better. This is why closing old accounts isn’t recommended.

Also, do you make use of your available credit? You can’t just leave it alone – you need to pay off a balance each month to prove you’re responsible with credit. (That said, do not carry a balance from month-to-month if you can help it!)

Types of Credit: Having a diverse amount of credit can help. For example, you may have an everyday credit card you use, student loans, a car loan, and a store credit card. This is a decent amount of credit diversification.

New Credit: Opening new lines of credit or accounts at the same time, or within a short period of time, can make you look risky. Especially when you’re younger and don’t have a substantial credit history.

What Your Credit Score Does For You

Your credit score has a lot of power. As someone in their 20s or 30s, you’ll likely be concerned with the following ways having a good credit score can help you.

It Lowers Your Interest Rate

Easily one of the biggest benefits, having a better credit score can lower the interest rate on any loan you take out.

For example, if your credit score is 750, you may receive a 2.5% interest rate on a car loan, versus a 4% interest rate for someone who has a 650 credit score.

Why does this matter so much? The lower your interest rate, the less you have to pay over the life of any loan.

Here’s an example:

Say you want to take on a $250,000 mortgage. You choose a 30 year term, and because your credit score is excellent, you have a 3.5% interest rate. You’ll pay $154,140.22 in interest over the life of the loan.

You have the same term and mortgage, but because your credit score is just good, you have a 4.7% interest rate. You’ll pay $216,774.03 in interest over the life of the loan instead.

See what a difference it makes?

It Makes Travel Hacking Easier

The most exclusive rewards cards require excellent credit. If you use credit cards responsibly, travel hacking is a no-brainer for those that love to get away. You’ll be able to qualify for the cards with the best sign on bonuses and the best rewards, making travel cheaper.

It Makes Qualifying for an Apartment and Job Easier

Some people don’t think credit score should be a factor in employment. Regardless of the ethics, there are certain employers out there who are taking credit scores into account when hiring. You don’t want to lose out on a job opportunity because you can’t manage your money, do you?

Additionally, landlords will run your credit when you fill out an application for an apartment. If there are several people interested in renting it, you might have a better chance of getting it if you have an excellent score. Landlords would rather rent to someone who has proven they can handle monthly payments and pay on time.

There you have it – a short lesson on what your credit score is, and why it matters. And trust me, it does! My fiance applied for a car loan last week. While his credit score is excellent, his credit history wasn’t bulky enough. As a result, he received a higher interest rate than he thought he would qualify for. Don’t fall into that trap.

If you’re wondering how you can improve your score, or build your credit, tune in next week for another quick lesson.

Did you know what your credit score consisted of? Do you know what your credit score is?

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