Welcome to decoding credit scores! Your credit score is a three-digit number that dramatically impacts your financial life - from loan approvals to interest rates to apartment applications.
Think of it as your financial reputation translated into numbers.
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Can you think of one thing that affects a credit score?
Credit scores range from 300-850, with higher numbers meaning better creditworthiness. Most scores fall between 600-750, and anything above 700 is considered good credit.
Lenders use this number to decide whether to approve you and what interest rate to offer.
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What credit score range would you guess you're currently in?
Here's the surprise: your credit score is calculated using just five main factors. These factors have different levels of importance, like ingredients in a recipe.
Understanding these five factors gives you the power to improve your score strategically.
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Which factor do you think matters most for your credit score?
Factor #1: Payment History (35% of your score). This is the biggest factor - whether you pay bills on time or miss payments.
Even one late payment can drop your score 50-100 points! On-time payments build strong credit over time.
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Have you ever had a late payment that you worried might affect your credit?
Factor #2: Credit Utilization (30% of your score). This measures how much of your available credit you're using across all cards.
Using over 30% of your limits hurts your score. Under 10% is ideal for excellent scores.
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If you have a $1,000 credit limit, what balance would keep you under 30%?
