Good credit is critical to your overall financial health and can impact many other aspects of your life. Keeping your credit in good standing puts you in the position to qualify for more, and better, financing for large purchases and can potentially save you money in the long run.
Reviewing your credit report is often a primary way that potential creditors, lenders, landlords and even employers determine whether you are a good candidate for their product, services or company. Your credit can determine interest rates on loans, utility fees and security deposits.
What Is Good Credit?
Whether your credit is "good" is determined by your
- Credit history, which looks at your payment patterns over time.
- Credit score, which gives a rating to your credit risk at a moment in time.
Credit scores change often, as does the information in your credit history. Learn more about credit scores.
The Outcomes of Good Credit
These are some of the many benefits of good credit:
- Better interest rates
- Lower fees
- Better chance of getting approved for a loan
- More options for loan products
- Better chance of getting approved for an apartment rental or hired for a job
- Better access to utility or cellphone accounts
- Increased savings, opportunities to invest your dollars and build assets
3 Tips to Keep Your Credit on Track
The best practice is to review your credit regularly and manage your credit wisely over time.
1. Pay on time.
The best thing you can do to build, maintain or improve your credit is to pay your bills on time.
The types of accounts considered for credit payment history include:
- Credit cards
- Retail accounts, such as credit cards from department stores
- Installment loans, such as car loans, on which you make regular payments
- Mortgage loans
- Student loans
- Finance company accounts, such as car dealer in-house lenders
2. Don't let your credit card balance get too high.
If you allow your credit cards to reach high, unpaid balances, or if you only pay the minimum amount due, credit cards can cost you hundreds (and even thousands) of dollars in interest and can damage your credit.
3. Review your credit report annually.
You should know what financial activities are affecting your credit, and you're entitled to receive a free copy of your credit report each year from each major credit bureau via annualcreditreport.com.
You can also keep an eye on your credit score through free apps such as Credit Karma™, NerdWallet, WalletHub® or others. Be aware, however, that the scores shown in these apps are not the same as FICO® scores that are used by most lenders and creditors to make lending or credit decisions. Still, they are a useful way for you to review the financial activities that are affecting your credit.
The result of careful planning and money management, good credit gives you more financial power by increasing your borrowing capacity and demonstrating that you can manage money responsibly.
To learn more about credit, use our suite of financial capability and homeownership education resources, CreditSmart® — also available in Spanish. From managing debt to buying a home, you can learn it all at your pace, on your terms. Learn more about CreditSmart.
CreditSmart®: Financial Education on Your Terms
Education has power, and it’s in your hands with the CreditSmart® suite of financial and homeownership education resources. Whether you’re renting a home, are on the path to homeownership or saving for the future, CreditSmart — also available in Spanish — has something for you.Learn more