Credit Scores

How credit scores work

A credit score (typically FICO, 300–850) estimates how likely you are to repay borrowed money. It affects the interest rate you're offered on loans, credit cards, mortgages, and sometimes even rental applications or insurance premiums.

The biggest factors: payment history (pay everything on time, always), credit utilization (try to use well under 30% of your available credit limit), length of credit history (older accounts help — don't close your oldest card), and the mix/number of recent credit inquiries.

Why it matters for investing

A better credit score means cheaper debt — a lower mortgage rate alone can save tens of thousands of dollars over a loan's life. That's money that could otherwise go toward investing. Building good credit is a quiet but powerful part of a long-term financial plan.

Opening your first credit card

With no credit history, a secured credit card (backed by a refundable deposit that becomes your credit limit) or a student credit card are usually the easiest approvals. Becoming an authorized user on a parent's or partner's long-standing, well-managed card can also give your credit history a fast head start — just make sure that card is actually paid on time, since their habits become part of your credit file too.

Once you're approved, treat it like a debit card: only charge what you can pay off in full every month. A first credit card is a tool for building a track record, not a way to increase what you can afford.

If you're a victim of identity theft

Pull your credit reports for free at annualcreditreport.com — the only site required by federal law to give it to you at no cost — and look for accounts or inquiries you don't recognize. Report the theft at identitytheft.gov, which builds a personalized recovery plan and generates the documents you'll need to dispute fraudulent accounts.

A credit freeze (free, and the strongest protection) blocks anyone — including you — from opening new credit in your name until you lift it; a fraud alert (also free) just requires lenders to verify your identity before approving new credit. Freezing your report with all three bureaus (Equifax, Experian, TransUnion) is worth doing any time you suspect a problem, not just once you're sure.