Want to learn how to improve your credit scores — and understand why the heck they matter anyway — without reading through 12 pages of snooze-inducing text?
Then you’re in the right place. Keep scrolling for snappy answers to four of the most common questions about credit.
In This Article
What is a credit score?
A credit score is a number that lenders use to determine your responsibility level when it comes to paying off your debts. Think of it like this:
The better your credit history, the better your scores — and the better you’ll look to lenders.
The most widely used credit scores are issued by an agency called FICO. Their credit scores range from 300 to 850, with the U.S. average clocking in at 711.
If you’re wondering where you stand, you can get a free FICO score estimate here.
(Don’t worry: Checking your credit scores online counts as a “soft pull” — and will not lower them.) 💚
If you’ve never used credit before,then there’s a chance you might not have any credit scores yet. And if you’ve used credit in the past, but have made some mistakes — think: paid bills late — then your credit scores might be on the low side.
How is your credit score determined?
- Payment history (35%): Do you pay your bills late? Have you missed any payments? The single most important factor in your credit scores is paying your bills on time, every time.
- Amounts owed (30%): How much of your available credit are you using? Lenders like to see low credit utilization ratios; if all your cards are maxed out, they’re probably not going to want to pile more credit on your plate.
- Credit history (15%): How long have you been using credit? Hint: This is why it’s good to keep your oldest credit card open. If you close it, it’ll reduce your average age of accounts.
- Credit mix (10%): Which types of credit do you hold? Do you have only credit cards, or do you have a mortgage, too? (This one isn’t a huge deal, so don’t go signing an auto loan simply to improve your credit mix!)
- New credit (10%): How much credit have you taken out recently? If you’ve just opened a flurry of new accounts, lenders might assume you’re struggling financially.
Why are credit scores important?
To put it simply: Good credit scores open many doors in life.
When you have good credit, it’s easier to get approved for loans, apartments, and utilities (many cell phone providers run your credit, too!) Some employers even consider your credit in hiring decisions.
And, once you’re approved for a loan, having strong credit scores can also snag you lower interest rates. Though a single percentage point may not sound like a lot, it adds up.
Let’s say you’re buying a $200,000 house with a 5% down payment. If your mortgage’s interest rate is 4%, you’ll pay $136,522 in interest over 30 years. But if you had better credit and could land a 3% interest rate, you’d save $38,145 over the lifetime of your mortgage.
What’s a good credit score?
|FICO Score Range||Rating|
Translation: Anything above 670 is considered “good,” and will make it easier to secure loans and lower interest rates. (Looking for specifics? Here’s what a good credit score in your 20s and 30s looks like.)
But even if you’re in the “fair” range, you can probably still get a loan. It’s when your scores are “poor” that lenders are going to view you as a risky borrower, making it tough to get financing.
If your credit scores fall at the lower end of the spectrum, remember: They’re based on your past credit behavior, nothing more. They’re not a judgment on you as a human — and they’re not permanent.
Ready to whip your credit into shape?
We said it before and we’ll say it again: That Good credit can you help you go far in life. And here at Chime, we want to help you open as many doors as you can.
That’s why we designed Chime Credit Builder Visa® Credit Card: a secured card specifically for people who want to build their credit scores over time. In fact, after using the card, our members’ scores increased by an average of 30 points.¹
The important thing is to view your credit building journey as a marathon, and not a sprint. Even if it takes a while, we promise your responsible use of credit will eventually pay off!
How can Credit Builder help my credit score?
Credit Builder offers features that help you stay on top of key factors that impact your credit score. Consistent use of Credit Builder can help you build on-time payment history, increase the length of your credit history over time, and more. We report to the major credit bureaus – TransUnion®, Experian®, and Equifax®.
Learn more about credit building with Credit Builder.
How do I apply for a Chime Credit Builder credit card?
Join the waitlist to get early access to Credit Builder! The waitlist is currently only available to Chime members. New to Chime? Join here.
Each week, we will invite members from the waitlist to Credit Builder. Invited members can complete their applications directly from the home screen of the Chime mobile app–make sure you have the most updated version of our app! You can find your Chime Credit Builder invitation in the Home and Settings screens of your app.
What makes Credit Builder different from traditional credit cards?
Unlike traditional credit cards, Credit Builder helps you build credit with no fees and no interest. There’s also no credit check to apply!
Credit Builder is a secured credit card. The money you move into Credit Builder’s secured account is the amount you can spend on the card. Unlike other secured credit cards, that money can be used to pay off your monthly balances. Since Credit Builder doesn’t have a pre-set limit, spending up to the amount you added won’t contribute to a high-utilization record on your credit history.
Learn more about how Credit Builder works.