Credit scores can influence everything from the interest you pay on a loan to the credit cards you can qualify for. But not all strong scores are equal. A score that’s considered good may get you approved, but a great score could get you better terms, more offers, and lower long-term costs. That gap can have a big impact on your financial future.

Credit scores by the numbers

Most lenders rely on either the VantageScore or the FICO Score to assess creditworthiness. Both use a scale from 300 to 850 and draw on similar credit report data, but the way they classify scores differs slightly.

Although people often talk about a single credit score, everyone actually has many. You may have a FICO Score 8, a VantageScore 3.0, and several industry-specific scores, such as versions used for auto lending or credit card applications. Each score is calculated using the same core credit data, but different models or lenders may weigh certain factors more heavily. This is why your score might vary slightly depending on where you check it. There is some overlap, and many models consider scores in the mid-600s to low 700s as good, and scores above roughly 740 as great or excellent.

What a good credit score can offer

If your credit score falls in the good range, you’re likely to qualify for a wide variety of loans and credit cards. You may be approved for a mortgage, get an auto loan with a reasonable rate, or open a credit card with moderate rewards.

The catch is that you may not get the best terms. Lenders use risk-based pricing, which means you might face higher interest rates or fees than someone with excellent credit, even if you both qualify for the same product.

Good credit shows that you’re responsible with debt, but lenders may still view you as a moderate risk. That uncertainty can translate into slightly stricter lending conditions.

Why a great credit score makes a difference

When your score reaches the great (very good, excellent or exceptional) range, the benefits tend to become more noticeable. Lenders see you as a low-risk borrower. That means you may be offered:

• Lower interest rates
• Higher credit limits
• Faster loan approvals
• Access to top-tier credit cards and rewards programs
• Better terms on refinancing or balance transfers

Over time, these advantages can add up. According to the Consumer Financial Protection Bureau, credit score is one of seven factors determining the interest rate you are offered on a mortgage.

What separates good from great

Great credit takes more than just avoiding mistakes. It reflects long-term, consistent financial behavior. If you already have a good score, moving up typically means refining your habits rather than overhauling them.

Several key differences tend to separate the two categories:

• Credit utilization is typically lower. Many borrowers with excellent credit use less than 10 percent of their available credit.
• Credit history is longer. Lenders like to see that you’ve managed credit responsibly over many years.
• Accounts are older and well-maintained. Keeping long-standing accounts open contributes to score strength.
• New credit applications are limited. Applying for multiple accounts in a short time can reduce your score temporarily.
• There’s a solid mix of credit types. A combination of revolving credit (like credit cards) and installment loans (like car loans or mortgages) can be a plus.

For a full breakdown of how credit score factors work, see Credit Sesame’s guide to what affects your credit score at https://www.creditsesame.com/learn/credit-score/what-affects-your-credit-score/.

Moving from good to great

If your score is already in the good range, reaching great credit status may be a matter of consistency. Paying on time every month is essential, but it’s also worth paying attention to the details.

Start by reviewing your credit reports for accuracy. A single incorrect late payment could be holding your score back. Then look at your reported credit utilization. Even if you pay your balance in full, your issuer might report a high balance at the wrong time. Paying down balances before the statement closing date can help.

If your credit history is fairly new, time will help — as long as you keep accounts open and active. Avoid unnecessary hard inquiries, and consider using a tool that lets you get credit for nontraditional payments like rent or utilities.

Monitoring your credit over time is one of the most effective ways to stay on track. A free credit monitoring tool can help you follow your progress and spot issues early.

Why the extra effort is worth it

A good credit score is a strong start. But a great score can offer more options, better pricing, and long-term savings. Whether you’re borrowing for a home, financing a car, or simply trying to qualify for a high-rewards credit card, the difference between good and great may determine how much you pay or how far your money goes.

Building excellent credit doesn’t require perfection. It does require attention, patience, and the willingness to stay consistent even when the results take time. But for many people, the payoff can be well worth it.

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Financial technology (fintech) is revolutionizing how people manage their money, offering more control, convenience, and security than ever before. From artificial intelligence-driven budgeting tools to blockchain-based transactions, fintech innovations are reshaping personal finance to empower consumers.

Enhanced credit monitoring and fraud prevention

With the increasing digitalization of financial transactions, credit monitoring, and fraud prevention tools have become more sophisticated. Real-time credit score tracking, identity theft alerts, and AI-driven fraud detection help consumers protect their financial well-being.

These tools provide greater awareness and security, reducing the risk of identity theft and unauthorized transactions. Financial institutions and credit monitoring services now offer dark web monitoring, which scans for stolen personal information to alert users of potential breaches before they lead to financial damage.

AI-powered financial assistants

Artificial intelligence plays an increasing role in personal finance, helping users track spending, manage budgets, and even make investment decisions. AI-driven financial assistants can analyze transaction patterns, predict future expenses, and offer personalized financial recommendations.

These tools help consumers make informed decisions without needing extensive financial knowledge. Many banks and fintech companies now offer AI chatbots that can answer financial questions, provide savings suggestions, and even automate bill payments based on user spending habits.

Digital banking and mobile-first services

Traditional banking is no longer the default choice for many consumers, as digital banks and mobile-first financial services provide seamless, user-friendly experiences. Online-only banks often offer lower fees, higher interest rates on savings, and real-time transaction tracking.

Features like instant payments, automatic savings, and fraud alerts help consumers stay on top of their financial health with ease. Additionally, mobile wallets such as Apple Pay and Google Pay have simplified transactions, making it easier than ever to conduct secure, contactless payments both in-store and online.

Buy now, pay later (BNPL) is reshaping credit access

The rise of buy now, pay later services is changing the way people make purchases. By offering interest-free installment payments, BNPL services provide a flexible alternative to traditional credit cards. However, as BNPL data becomes integrated into credit scores, consumers must use these services responsibly to avoid potential negative impacts on their financial profiles.

Some financial experts warn that easy access to installment payments can lead to overspending, causing financial strain if users fail to manage their payments properly.

Blockchain and decentralized finance (DeFi)

Blockchain technology is expanding beyond cryptocurrency to power decentralized finance (DeFi) solutions. These innovations enable peer-to-peer lending, digital asset exchanges, and automated financial contracts without relying on traditional banks.

DeFi offers increased accessibility and transparency, but consumers must navigate potential risks, such as regulatory uncertainty and security vulnerabilities. Despite these challenges, DeFi is growing rapidly, with many investors looking to decentralized platforms for alternative financial opportunities.

The role of robo-advisors in investing

Robo-advisors are AI-powered investment platforms that help consumers build and manage diversified portfolios with minimal effort. These platforms use algorithms to assess risk tolerance, recommend asset allocations, and automatically rebalance portfolios.

Robo-advisors have made investing more accessible by offering lower fees than traditional financial advisors and allowing individuals to start with small investments. As more people turn to automated investing, robo-advisors continue to refine their strategies to offer more personalized financial solutions.

The growing impact of biometric security in fintech

Security concerns remain a top priority in fintech, and biometric authentication is emerging as a key solution to enhance financial security. Fingerprint scanning, facial recognition, and voice authentication are increasingly used to verify identity in banking apps and payment platforms.

These technologies not only improve security but also enhance user experience by eliminating the need for complex passwords. As cyber threats evolve, biometric security will play a vital role in protecting consumers’ financial data.

The future of fintech innovations

Fintech is giving individuals more control over their financial lives, making it easier to save, invest, and manage credit. As technology evolves, consumers should stay informed about new financial tools and best practices. Emerging trends such as biometric authentication, voice-activated banking, and predictive financial analytics are set to enhance the fintech landscape further.

By leveraging fintech innovations wisely, people can enhance their financial security and take advantage of new opportunities in the digital economy.

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Discussion of credit scores often centers on young people starting to build credit or people trying to rebuild credit after financial trouble. However, a new study shows that credit scores can also be important as an indicator of mental health as people grow older.

The study found that missed payments and declining credit scores can be early warning signs of Alzheimer’s disease and other forms of dementia. That means monitoring credit scores remains crucial even as you or your loved ones approach retirement.

Credit use declines as people reach retirement age

People may pay less attention to their credit scores in their later years because they have less need for credit.

According to the Federal Reserve’s Survey of Consumer Finances, just 53.4% of people aged 75 or older had any form of debt. This is the lowest percentage of any adult age group and well below the 77.4% of the general adult population.

The median amount of debt held by people aged 75 or older is $36,000. That’s the lowest of any age group and less than half the median for all adults of $80,220.

There are two simple reasons why older Americans tend to borrow less than other adults. They tend to spend less, and they have more wealth. So, with less need for credit, why worry about credit scores?

Good credit remains important even as you age

Even if you use credit less in retirement, maintaining a strong credit score remains essential. Unexpected expenses—medical bills, home repairs, or family emergencies—can arise anytime. Without good credit, financing options may be limited or more expensive.

Credit access also provides convenience and security. A credit card allows for safe, cash-free transactions, fraud protection, and easy online purchases. It can also help cover large expenses, such as a new vehicle or home modifications while preserving savings.

Many older adults may relocate, whether downsizing, moving closer to family, or entering assisted living. A mortgage, lease, or even a care facility application may require a credit check. Keeping a solid credit profile ensures you have options when you need them most.

Credit scores as an early warning sign of cognitive decline

Beyond maintaining access to credit, tracking your credit score may offer an unexpected benefit: detecting early signs of cognitive decline.

Researchers from the Federal Reserve Bank of New York and Georgetown University analyzed data from 2.5 million older adults over 17 years. Among them, about half a million were eventually diagnosed with Alzheimer’s disease or a related form of dementia. The study found that financial warning signs often appeared years before diagnosis.

Missed credit card payments were common as early as five years before diagnosis, while missed mortgage payments became more frequent about three years prior. In the year leading up to diagnosis, individuals later found to have dementia were 34% more likely to miss credit card payments and 17% more likely to miss mortgage payments than before.

Since declining credit scores often precede cognitive impairment, monitoring financial habits can serve as an early indicator of potential issues. Catching these signs early allows individuals and their families to seek medical care and put financial safeguards in place before problems escalate.

Tips for maintaining good credit in later years

Taking proactive steps can help you or a loved one stay on top of credit performance in retirement.

• Use automated payments for recurring bills. This reduces the risk of missed payments, which can hurt your credit score. Automated payments work best for fixed expenses like mortgages, utilities, and insurance premiums.
• Avoid carrying credit card balances. Using a credit card for convenience is fine, but regularly carrying a balance can lead to unnecessary interest charges and signal financial strain. Paying off your balance in full each month keeps your finances in check.
• Monitor your budget and adjust as needed. Retirement finances require careful planning, but unexpected expenses can arise. Regularly reviewing your budget ensures you stay on track and make adjustments as needed.
• Review payments with a trusted relative. While financial privacy is important, allowing a trusted family member to help track bills can prevent missed payments and catch potential fraud early. Limited access to statements—not full account control—can provide peace of mind.
• Check your credit score regularly. Signing up for credit monitoring or reviewing your credit score can help detect sudden changes. A sharp drop may indicate fraud, financial mismanagement, or, according to the study, cognitive decline.

Credit scores and dementia may seem unrelated, but research suggests otherwise. Monitoring your credit isn’t just about financial health—it could also provide early warning signs of cognitive decline. Whether for yourself or a loved one, staying on top of credit habits can help protect both financial security and overall well-being in the years ahead.

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Understanding credit can feel overwhelming, but breaking it down into its fundamental components can make it more manageable. This article will explore the ABCs of credit, including key concepts, types of credit, and essential tips for managing your credit effectively.

A – Assess your credit

Credit score

Your credit score is a three-digit number used by lenders to evaluate your creditworthiness. Typically, it ranges from 300 to 850, with higher scores indicating better creditworthiness. Familiarize yourself with the scoring system and check your score regularly through various credit monitoring services, such as Credit Sesame’s free daily credit score.

Credit report

A credit report provides a detailed account of your credit history, including your borrowing habits, payment history, and outstanding debts. You can obtain a free credit report summary from Credit Sesame or one from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com.

B – Build your credit

Getting started

If you’re new to credit or looking to improve your score, consider a credit builder account, such as the Sesame Credit Builder, together with Sesame Cash. These accounts can help grow your score with everyday purchases like gas, groceries, or monthly bills. Make sure to have a good mix of credit accounts.

Types of credit

There are two main types of credit—revolving and installment.

• Revolving credit. This type of credit allows you to borrow up to a certain limit and pay it back over time. Credit cards are the most common form of revolving credit.
• Installment credit. This type of credit involves borrowing a fixed amount and repaying it in installments over a set period. Examples include personal loans, auto loans, and mortgages.

C – Control your credit

Managing debt

Keeping track of your debts is crucial for maintaining good credit health. Create a budget to manage your spending and ensure that you can meet your monthly obligations.

Paying on time

Your payment history is one of the most significant factors affecting your credit score. Pay your bills on time and keep your credit utilization low (ideally below 30% of your available credit). Set up reminders or automate payments to avoid late fees and negative impacts on your score.

Credit utilization ratio

This ratio measures how much of your available credit you are using. A lower ratio is better for your credit score, so aim to use less than 30% of your available credit at any given time.

Regular Monitoring

Stay proactive by regularly monitoring your credit report and score. This will help you catch any errors or fraudulent activity early on, allowing you to take corrective action promptly.

Understanding the ABC of credit is essential for making informed financial decisions. By assessing your credit, establishing and building it wisely, and controlling your debt, you can achieve a healthier credit profile and greater financial stability. Remember, credit is a tool that, when managed effectively, can open doors to better interest rates, loans, and opportunities.

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When managing personal finances, few numbers are as important as your credit score. It’s a key factor that lenders use to decide whether to approve your loan applications, set interest rates, and even determine your eligibility for housing or employment. Despite its importance, many people don’t fully understand how credit scores work or how they are calculated.

1. Your credit score isn’t the same everywhere

One of the most surprising aspects of credit scoring is that you have more than one credit score. Different credit reporting agencies (Equifax, Experian, and TransUnion) calculate your score using slightly different methods, which means your score can vary depending on which agency’s data is being used. Furthermore, there are different types of credit scores, including FICO and VantageScore. These different scoring models might weigh factors like payment history or outstanding debt differently, leading to variations in your score.

Tip: When checking your credit score, make sure you know which model is being used to understand where you stand in the eyes of lenders. A ” good ” score in one model might only be “fair” in another.

2. You don’t have to carry large debt to have a high score

Many people believe you must carry large debt or use credit heavily to have a high credit score, but this isn’t true. What matters most to credit agencies is how you manage credit, not how much you owe. Keeping your debt levels low and paying off your balances in full each month can be just as beneficial as responsibly managing a large debt. The key factors affecting your score are your payment history and the amount of available credit you use, also known as credit utilization.

Carrying high balances can harm your score, even if you make timely payments. Aim to keep your credit utilization below 30%, meaning you should only use up to 30% of your available credit limit at any time. Doing this demonstrates responsible credit management without racking up unnecessary debt.

Tip: If you have multiple credit cards, consider spreading your expenses across them to keep your overall utilization rate low.

3. Closing old accounts can hurt your score

Many people think that closing old credit card accounts they no longer use will boost their scores, but the opposite is often true. Your credit score benefits from having a long credit history, and closing old accounts can shorten your average account age, which could lower your score. Additionally, closing a credit card reduces your total available credit, which can increase your credit utilization ratio if you have outstanding balances on other cards.

For example, if you have a total credit limit of $10,000 spread across three cards and close one with a $3,000 limit, you’ve just reduced your total available credit by 30%. If you still carry balances on your other cards, your utilization rate increases, potentially hurting your score.

Tip: Instead of closing old accounts, consider using them occasionally for small purchases and paying off the balance in full to keep them active.

4. Your credit score is affected by more than just debt management

Most people know that debt management plays a role in determining credit scores, but other, less obvious factors also contribute. For example, your credit score can be affected by how many recent credit inquiries you’ve made, whether or not you’ve had a bankruptcy, and even if you’ve had a bill go to collections. Credit inquiries occur when a lender checks your credit report, and too many inquiries in a short time can signal to lenders that you’re desperate for credit, which can negatively affect your score.

On the other hand, “soft” inquiries, such as when you check your own score, do not impact it. Being mindful of how often you apply for new credit or loans is important. Each hard inquiry may knock a few points off your score, so it’s wise to avoid multiple applications within a short period unless absolutely necessary.

Tip: Space out your credit applications and be selective about which offers you apply for. Also, check your report for errors or unauthorized inquiries.

5. Utility bills and rent can boost (or hurt) your credit score

Many people do not know that on-time payments for utility bills and rent can help build your credit score. These payments typically don’t appear on your credit report, but some services now allow you to report them voluntarily. This can be especially helpful for people who don’t have a lot of traditional credit history but have a solid track record of paying their bills on time.

On the flip side, falling behind on utility or rent payments and your account is sent to collections can hurt your credit score. Collection accounts can stay on your report for up to seven years and significantly drag down your score, even if you eventually pay off the debt.

Tip: Look into services that allow you to add utility and rent payments to your credit report, which can potentially increase your score.

Bonus tips for mastering your credit score

Understand how credit scores are calculated

FICO and VantageScore use similar factors to calculate your credit score, but their exact formulas differ slightly. The main factors that contribute to your score are:

• Payment history (35%). This is the most important factor; missing payments can quickly lower your score.
• Credit utilization (30%). How much of your available credit you use at any given time.
• Length of credit history (15%). The longer you’ve had credit, the better.
• New credit inquiries (10%). Applying for new credit can temporarily lower your score.
• Credit mix (10%). Having various credit types (credit cards, loans, etc.) can improve your score.

Knowing how these factors are weighted can help you make smarter decisions about your credit usage.

Monitor your credit regularly

It’s crucial to check your credit report regularly to ensure that all the information is accurate and that there are no signs of identity theft. By law, you’re entitled to one free credit report from the three major credit bureaus every 12 months.

Staying on top of your credit score is the first step to improving it. Even small changes, like paying off a little extra on your credit card balance or resolving an old account, can yield positive results over time.

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Growing numbers of Americans are seeking help managing credit. The reasons are obvious—debt problems have become a national epidemic. What may be less obvious are the rewards of better credit management.

Getting credit help can do more than get you out of your current debt trouble. It can ultimately leave you better off, with lower expenses and greater peace of mind.

Credit counseling is in demand

Money Management International (MMI) is a nonprofit credit counseling organization. They recently reported a 72% year-over-year increase in people seeking credit counseling. That’s a huge increase and an indication of how quickly consumer debt is getting out of control.

What is credit counseling? It can entail any or all aspects of learning to manage credit more effectively:

• Information about personal finance products
• Help with budgeting to live within your means
• Explanations of credit reports and credit scores
• Education about debt reduction strategies
• Creation of a debt management plan

People often need this kind of help because they struggle to understand financial products and basic money management skills. This is why even people who earn a decent income can find themselves with debt problems. The MMI reported a 73% year-over-year increase in people seeking help among people with above-average incomes.

The need for help with credit is real

People seeking help are being realistic about their financial troubles. Financial statistics indicate that an increasing number of consumers are finding themselves with serious debt problems.

Here are some examples of data in the recent Household Debt and Credit Report from the Federal Reserve Bank of New York:

• Total household debt has reached a record high of $17.69 trillion.
• Credit card debt has been the fastest-growing type of debt over the past year, and it is also typically the most expensive.
• The rate at which credit accounts are becoming seriously overdue has increased for nine straight calendar quarters.
• Young adults, in particular, are having a hard time handling debt, with 18 to 29-year-olds having the highest delinquency rate of any age group.

These statistics show that the growing number of people seeking help means they are being realistic about their difficulties. Being realistic can be the first step towards fixing the problem.

Credit goals and the benefits of reaching them

Here are some of the basic personal finance skills you can get by seeking credit education and how those skills can benefit you:

Keeping up with payments

The monthly flood of bills can get overwhelming at times. One of the first steps is to organize bill payment to make it as efficient as possible. Creating a monthly routine to process your bills can help. Tools like automated bill payment can reduce the paperwork involved and help keep you on schedule.

Living within your means

Budgeting skills help you anticipate expenses so you don’t suddenly fall short. Managing your cash flow is essential to ensuring you have more money coming in than going out. While borrowing can play a constructive role, you should not depend on borrowing to meet routine expenses. Before you borrow, you should budget to see how you will be able to afford the payments.

Getting out of debt

There are various strategies for getting out of debt. Making more than the minimum payments can help you get out of debt more quickly and less expensively. Refinancing and debt consolidation may also be options for making your payments more affordable. Having a clearly defined debt reduction plan can give you a sense of progress instead of feeling stuck in an endless cycle of debt.

Improving your credit score

Improving your credit score can be one way of measuring your progress in handling debt. Increasing your score may also reduce your borrowing costs, making debt reduction easier. Credit monitoring with personalized suggestions can give you the tools and information you need to manage your credit better and hopefully improve your credit score.

Protecting your finances

Getting out of debt trouble is a big step, but it’s not the end of the journey. Another important personal finance skill is learning how to protect yourself and your credit record. It is a good idea to regularly monitor your credit report and know how to address any unexplained changes. It would be best if you also became an educated consumer to choose the most cost-effective financial products. Finally, stay informed so you can be aware of scams that might threaten your accounts.

More people are seeking personal finance help these days, a sign of the serious consumer debt problem in the US. However, those seeking help are making the first move toward solving that problem.

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While not exhaustive, this A to Z of credit terminology is a solid starting point for understanding key concepts in the world of credit. Whether navigating credit reports, considering loans, or aiming to boost your credit score, familiarizing yourself with the language of credit is a valuable tool on your journey toward financial literacy.

• Amortization: The gradual repayment of a loan through scheduled installments covering principal and accrued interest.
• Annual percentage rate (APR): The total cost of borrowing, expressed as a percentage, encompassing interest and fees.
• Authorized user: An individual granted permission to use another person’s credit account, often to build their own credit history.
• Authorized user credit card: An authorized user credit card is issued to an individual authorized by the primary cardholder to make purchases using the card. The primary cardholder remains responsible for any debts incurred on the card.
• Balance transfer: Shifting outstanding debt from one account to another, typically to secure lower interest rates or consolidate payments.
• Bad credit: A low credit score indicating higher risk, making it challenging to obtain favorable loan terms.
• Bankruptcy: A legal process relieving individuals or entities from overwhelming debt obligations, often involving restructuring or asset liquidation.
• Billing cycle: The timeframe between credit card statement issuance and the payment due date.
• Charge-off: A creditor’s declaration that a debt is unlikely to be collected, typically after prolonged non-payment.
• Collateral: Assets pledged to secure a loan, providing lenders recourse if the borrower defaults.
• Credit bureau: Agencies that collect and maintain credit information, generating reports utilized by lenders to assess creditworthiness. Equifax, Experian and TransUnion are the three major credit bureaus in the United States.
• Credit limit: The maximum amount a borrower can owe on a credit account.
• Credit mix: The variety of credit types in an individual’s profile. Examples include mortgages, credit cards, and installment loans.
• Credit monitoring: A service that tracks changes in credit reports and alerts consumers to potential fraud or inaccuracies.
• Credit report: A detailed record of an individual’s credit history, including payment history, debt levels, and inquiries, used by lenders to assess creditworthiness.
• Credit score: A numerical representation of creditworthiness, typically ranging from 300 to 850, influencing loan approvals and interest rates.
• Credit utilization: The ratio of credit card balances to credit limits, impacting credit scores. Ideally, it should remain below 30%.
• Debt consolidation: Combining multiple debts into a single loan or payment plan to simplify management and potentially reduce interest rates.
• Debt-to-income ratio: The percentage of monthly income dedicated to debt payments, influencing loan eligibility and financial health. Generally, below 36% is considered favorable.
• Default: Failure to meet financial obligations according to loan terms, often resulting in adverse consequences like late fees, foreclosure, or repossession.
• Delinquency: Failure to make timely payments on debts, typically exceeding 30 days past due.
• Dispute: Challenging inaccurate or outdated information on a credit report through a formal process to ensure accuracy.
• Employment history: An individual’s record of work experience sometimes considered in credit decisions, as it reflects income stability.
• Equal Credit Opportunity Act (ECOA): U.S. law prohibiting discrimination based on race, religion, gender, national origin, marital status, age, or disability in credit granting.
• Equifax: One of the three major credit reporting agencies in the U.S., providing credit reports and scores to lenders.
• Experian: Another major credit reporting agency in the U.S., offering similar services to Equifax.
• FICO score: A widely used credit scoring model developed by Fair Isaac Corporation, influencing loan approvals and interest rates.
• Fair Credit Reporting Act (FCRA): U.S. law governing the collection, use, and disclosure of consumer credit information, ensuring consumer rights and accuracy of reporting.
• Fixed interest rate: An interest rate that remains constant throughout the loan term, providing predictable borrowing costs.
• Foreclosure: The legal process in which a lender repossesses a property due to borrower default on mortgage payments.
• Garnishment: A legal order allowing creditors to collect debt directly from a debtor’s wages or bank accounts.
• Good Credit: A high credit score indicating lower risk, facilitating access to favorable loan terms and lower interest rates.
• Grace period: A typically short timeframe, often offered on credit cards, during which no late fees are charged for overdue payments.
• Home equity: The portion of a property’s value owned by the homeowner, calculated as the difference between the market value and outstanding mortgage balance.
• Inquiry: A formal request for a copy of an individual’s credit report, which can temporarily impact credit scores due to potential new credit applications.
• Interest rate: The cost of borrowing money, expressed as a percentage of the loan amount, paid to the lender over the loan term.
• Income verification: The process of confirming a borrower’s income through documented proof, such as pay stubs or tax returns, to assess their ability to repay a loan.
• Joint account: A credit or bank account shared by two or more individuals, with joint responsibility for managing the account and repaying any associated debts.
• Joint credit: Credit extended to two or more individuals, with shared obligation for repayment and potential impact on each individual’s credit score.
• Judgment: A legal decision requiring a debtor to repay a debt, often resulting from a lawsuit filed by the creditor.
• Key derogatory: Significant negative information on a credit report, such as bankruptcies, foreclosures, or charge-offs, which can severely impact credit scores and access to credit.
• Late payment: A payment made after the due date, incurring late fees and potentially damaging credit scores.
• Line of credit: A revolving credit arrangement allowing a borrower to access funds up to a specified limit and repay borrowed amounts with interest over time.
• Loan modification: An alteration of existing loan terms, such as interest rates, repayment schedules, or principal amount, often negotiated between the borrower and lender to improve affordability.
• Loan-to-value ratio (LTV): The percentage of a loan amount compared to the appraised value of the collateral, used by lenders to assess risk and determine eligibility for certain loans.
• Mortgage: A secured loan used to purchase real estate, with the property serving as collateral for the loan.
• Negative information: Adverse details recorded on a credit report, such as late payments, delinquencies, or charge-offs, impacting credit scores.
• Net income: An individual’s total income minus expenses, reflecting their available financial resources and debt repayment capacity.
• No credit history: Lack of any credit activity or insufficient information on an individual’s credit report, making it challenging to assess creditworthiness.
• Non-dischargeable debt: Debt obligations that cannot be eliminated through bankruptcy proceedings, such as student loans and some types of taxes.
• Outstanding balance: The total amount currently owed on a credit account, excluding any minimum payments already made.
• Overdraft: A situation where a bank account balance falls below zero, typically resulting in fees and potential limitations on account activity.
• Over-the-Limit fee: A charge levied by a credit card issuer when the cardholder’s balance exceeds their credit limit.
• Personal loan: An unsecured loan not backed by collateral, typically used for personal expenses such as debt consolidation or major purchases.
• Pre-Approval: An evaluation of loan eligibility involving verification of income, employment, and credit. Requires documentation submission and a hard credit inquiry, which may temporarily impact credit score. Offers a conditional loan commitment based on verified information, strengthening your position as a borrower.
• Pre-Qualification: An initial assessment of loan eligibility based on self-reported information. Requires no documentation or credit pull, offering a general idea of potential loan terms but not guaranteeing final approval.
• Principal: The original amount borrowed in a loan agreement, excluding accrued interest.
• Public record: Financial information, such as bankruptcies, judgments, or tax liens, accessible to the public through official records.
• Qualification: Meeting the criteria and requirements established by a lender for loan approval, typically based on factors like credit score, income, and debt-to-income ratio.
• Qualitative analysis: An assessment of creditworthiness beyond solely relying on numerical data, considering factors like employment stability, financial habits, and overall financial situation.
• Revolving account: A credit account with a flexible spending limit, allowing repeated borrowing and repayment of balances with ongoing interest charges.
• Revolving credit: A type of credit characterized by a flexible spending limit and revolving balance, typically associated with credit cards and lines of credit.
• Refinancing: Replacing an existing loan with a new one, often to secure better interest rates, lower monthly payments, or extend the loan term.
• Repossession: The legal process by which a lender reclaims ownership of collateral, such as a car or house, due to borrower default on loan payments.
• Secured credit card: A credit card requiring a security deposit, often used by individuals with limited or poor credit history to build credit.
• Secured debt: Debt backed by collateral, which the lender can seize if the borrower defaults on the loan.
• Soft inquiry: A credit inquiry initiated for non-credit-related purposes, such as employment background checks or pre-qualification offers, typically not impacting credit scores.
• Subprime: Borrowers with credit scores below a certain threshold, typically associated with higher interest rates and stricter lending criteria.
• Terms and conditions: The specific rules and agreements governing a credit or loan agreement, outlining rights and responsibilities of both the borrower and lender.
• Thin file: A limited credit history with insufficient data for accurate credit score calculation, making it challenging for lenders to assess creditworthiness.
• TransUnion: The third major credit reporting agency in the U.S., providing credit reports and scores to lenders.
• Truth in Lending Act (TILA): U.S. law requiring lenders to disclose accurate and comprehensive information about loan terms and costs to borrowers before loan closing.
• Unsecured credit card: A credit card issued without requiring a security deposit, based solely on the borrower’s creditworthiness.
• Unsecured debt: Debt not backed by collateral, posing higher risk for lenders and potentially
• Usury: Charging excessively high interest rates on a loan, exceeding legal limits established to protect borrowers from predatory lending practices.
• Variable interest rate: An interest rate that can fluctuate over the loan term, influenced by market conditions or specific loan terms.
• Verification: Confirmation of information provided by a borrower during the loan application process, such as income or employment, to ensure accuracy and assess creditworthiness.
• Virtual credit card: A temporary credit card number generated for online transactions, enhancing security by limiting exposure of the actual card details.
• Wage garnishment: A legal order authorizing creditors to collect unpaid debts directly from a debtor’s wages or bank account, typically following a court judgment.
• Write-off: A creditor’s accounting practice declaring a debt as unlikely to be collected, removing it from their active accounts but potentially impacting the debtor’s credit score.
• Working capital: A financial metric representing a company’s short-term operational liquidity, reflecting its ability to meet ongoing expenses through current assets.
• Zero-percent APR: Some promotional credit cards or loans offer introductory periods with 0% annual percentage rate (APR), meaning no interest accrues on purchases or borrowed amounts within the specified timeframe.
• Zombie debt: Though not an official term, “zombie debt” refers to old, often expired debts that resurface unexpectedly. Creditors may attempt to collect on these debts through various means, making it crucial for consumers to remain vigilant and verify the legitimacy of such claims.

If you found An A to Z of credit terminology useful you may be interested in,

• You are financially more than your credit score
• Protecting your credit health and identity with credit monitoring

Your credit score made simple with Sesame Grade

You can see your credit picture at a glance with Sesame Ring. The unique user interface enables easy and intuitive review of TransUnion data. Credit report information from all three bureaus is available if you choose to upgrade to Premium. In addition to data and information, the app provides a measure of overall credit health with your Sesame Grade, and provides alerts, personalized action plans and AI-driven customer support. As you embark on your journey of credit and financial health improvement, knowledge is your most potent asset. Insights from all three bureaus can help you make sound financial choices, negotiate from a position of strength, and nurture your credit health. Regular reviews enable you to maintain accuracy, detect discrepancies and shape your financial future with confidence. Remember that credit is a tool that, when used wisely, can open doors to financial opportunities.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post An A to Z of credit terminology appeared first on Credit Sesame.

Protecting your credit health and identity is extraordinarily important. A poor credit score could cost you thousands yearly in higher borrowing, insurance, and home rental costs. And bad credit can stop you from getting the job you need to get out of financial trouble.

Meanwhile, identity theft is a growing problem that affects 1.4 million Americans each year. It can ruin your credit and obsess your mind while trying to untangle your finances from the fraudsters’.

Credit monitoring can be an effective way of protecting your credit health and identity. It can alert you when a new account is opened in your name, allowing you to act quickly before the criminal can wreak too much damage. It lets you improve your score by telling you when you’re doing harmful or beneficial things yourself.

Why credit health is important

Harvard University Employees Credit Union explains to its members the value of a high credit score:

Having a low credit score comes at a double cost. It can be more difficult to access financial products (such as credit cards, home loans and car financing) if your credit is less than stellar, and usually, the products end up costing more.

How much poor credit can cost you — in dollars

That sounds bad enough. But Syracuse University reveals the difference between a poor and excellent credit score in more stark terms. It reckons that, compared to someone with excellent credit, those with poor credit could pay:

• $48,425 more in interest on a private undergraduate student loan
• $591 a year more for homeowners insurance
• $1,374 a year more for car insurance
• $1,006 more for a security deposit for each home rental
• $9,320 more for each car loan
• $4,975 more for each credit card

Meanwhile, the median home price was $467,700 in the last quarter of 2022. A calculator on the MyFICO website shows those with a 620-639 credit score would, on average, pay $727,387 mortgage interest on that home over 30 years. That compares with $548,822 for someone with a 760-850 score.

Wow! That’s a $178,565 saving ($5,952 annually or nearly $500 a month) just for an excellent credit score.

Poor credit could easily cost you hundreds of thousands of dollars over your entire life.

Poor credit and your career

Worse, Syracuse University says 47% of employers run credit checks on new hires. So, the job you were counting on to get your credit score higher could be denied to you.

To be clear, employers can no longer check employees’ and prospective employees’ credit scores.

But, with your permission, they can still pull your credit report. And that shows every credit-related slip-up you’ve made going back at least seven years.

Of course, you could withhold your permission. But how would you explain that at your interview?

The good news is that it’s never too late to improve your credit health. So, read on to discover how credit monitoring could help you push your score higher. But first, let’s explore the second part of our theme, “protecting your identity.”

Protecting your identity

In 2021, “the number of consumer identity theft complaints rose 3.3%, to just over 1.43 million,” according to Top 3 credit bureau Experian. But it’s been around for many years.

Indeed, in 2013, they even made a movie called Identity Thief. It was lighthearted fun, but that’s the opposite of the experiences of the millions of victims.

Once fraudsters have hijacked your identity, they can open new credit accounts in your name. And, of course, they won’t make payments, which can quickly see your credit score slide down into subprime territory. You might soon find it impossible to borrow.

The effect on your credit report will be equally devastating. And, as we just learned, that could bar you from switching employers. It might even stymie a promotion within the same company.

How to protect yourself from ID theft

The two most significant ways criminals steal your identity are data breaches and “phishing.” Phishing is when a fraudster calls, writes, texts or emails you claiming to be from a trusted company or organization. And you believe them enough to part with personal information — perhaps including your Social Security Number.

Or you may click on a link that downloads a virus onto your computer or smartphone. The phishing virus typically allows the thief to access all the personal data you keep on those, sometimes including your bank passwords.

Phishing protections

The Federal Trade Commission suggests ways to recognize phishing scams. Even if you receive an email or text that looks to be from a bank or company you use and trust, be highly suspicious if it:

• Has a generic greeting rather than one that includes your name
• Says your account is on hold because of a billing problem
• Invites you to click on a link to update your payment details

In addition, you should install security software to protect your computer and phone. Make sure that the software and your operating system are set to update automatically. Whenever you’re offered the opportunity, opt for multi-factor authentication. That makes it much more difficult for a scammer to access your accounts.

Data breaches

It’s harder to protect yourself from data breaches. This is when a hacker gains access to an organization’s database that contains information about you. One of the worst examples of this (because it included Social Security Numbers) occurred in 2017. That’s when credit bureau Equifax lost control of information concerning 148 million people. There have been bigger hacks (Yahoo once had data compromised on 3 billion people), but those rarely included SSNs, something very useful to identity thieves.

Nowadays, an organization that suffers a data breach will generally let you know quickly. And it would be best if you immediately changed your password. But your best protection is credit monitoring. Because that quickly lets you know when an account’s opened in your name. And you can nip the identity theft in the bud.

Protecting your credit health with credit monitoring

Most people aren’t credit experts. They’re too busy living life. However, a good credit monitoring service can provide all the expertise you need.

Take Credit Sesame’s free credit score offering, for example. It refreshes your credit score daily, enabling you to track your score effectively in real-time. Imagine the power that gives you.

Better yet, it provides advice about your actions that are helping or harming your score. So, you can do more of the former and fewer of the latter.

And, as your score improves, it will suggest beneficial changes. For example, once your better score makes you eligible for a credit card with a lower interest rate than the one you have, it will tell you. And you can begin to save money quickly by applying for the plastic with a high probability of getting approved.

With such simple ways of protecting your credit health and identity, what’s stopping you from signing up for credit monitoring today?

If you enjoyed Protecting your credit health and identity with credit monitoring you may like,

• Use credit monitoring to avoid unpleasant surprises
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Your credit score made simple with Sesame Grade

You can see your credit picture at a glance with Sesame Ring. The unique user interface enables easy and intuitive review of TransUnion data. Credit report information from all three bureaus is available if you choose to upgrade to Premium. In addition to data and information, the app provides a measure of overall credit health with your Sesame Grade, and provides alerts, personalized action plans and AI-driven customer support. As you embark on your journey of credit and financial health improvement, knowledge is your most potent asset. Insights from all three bureaus can help you make sound financial choices, negotiate from a position of strength, and nurture your credit health. Regular reviews enable you to maintain accuracy, detect discrepancies and shape your financial future with confidence. Remember that credit is a tool that, when used wisely, can open doors to financial opportunities.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Protecting your credit health and identity with credit monitoring appeared first on Credit Sesame.

Credit impacts consumers’ ability to buy homes or cars and secure loans for education or starting a business. It is integrated into all aspects of modern financial planning. Understanding all aspects of credit and the intricacies of credit management is beneficial for consumers who want to crack the credit code and make informed financial decisions.

What is Credit?

Credit is a multifacted concept all relating to the financial mechanism allowing individuals to borrow money. It encompasses funds available that you have not yet earned and enables economic activities that could not otherwise happen.

Credit available

The credit available to you is the total of any loan amounts and credit card limits. For example, “I have $1,000 credit available on my credit card.” Credit comes in various forms including credit cards, loans, mortgages, and lines of credit. Details of credit available to you can be found on your loan documents and credit card statements.

Credit status

Credit status or standing is a description of your past relationship with credit. For example, “My credit is good” indicates a positive track record of repaying debts on time and managing credit responsibly. Bad credit suggests a history of late payments, defaults or excessive debt. Credit status can have a significant impact on your ability to secure future credit and the terms offered. Information about your past behaviour with credit can be found on credit reports issued by the three major credit bureaus, TransUnion, Experian and Equifax.

Credit Score

Your credit score is a numerical representation of your creditworthiness calculated from information in your credit reports. For example, “I have a credit score of 680.” In the United States, credit scores (there is more than one credit score) typically range from 300 to 850. Lenders and creditors use credit scores to assess the risk associated with lending money to you. A higher credit score indicates better creditworthiness making it easier to access credit at favorable terms. Credit scores are available for free from many banking and financial instutitions.

Credit scoring models

There are several different credit scoring models. VantageScore and FICO scores are two widely recognised credit scores. Each scoring model weighs factors slightly differently, so score varies depending on which model is used. However, the key factors that influence credit scores remain largely consistent across models.

Factors Influencing Credit Scores

Several factors influence a person’s credit score. These include:

• Payment history. This is the most significant credit factor, accounting for about 35% of your credit score. Payment reflects whether you pay your bills on time and if you make late payments or defaults.
• Credit utilization. This is the percentage of available credit that you use and accounts for around 30% of your credit score. For example, if you use $250 on a credit card with a $1,000 limit, that’s 25% credit utilization. High credit utilization can negatively impact your score. Ideally, keep utilization below 30% of your total credit limit.
• Length of Credit History. The length of time you have had credit accounts for about 15% of your score. Longer credit histories are viewed more favorably as it shows you have a history of managing credit.
• Credit mix. Credit cards, installment loans, and mortgages are different types of credit. Credit mix accounts for about 10% of your score and a good mix can positively impact your credit score.
• New credit inquiries. New credit applications account for 10% of your credit score. Every time you apply for new credit, a hard inquiry is made on your credit report. Too many inquiries in a short period can lower your score.
• Public records. Bankruptcies, liens, and judgments can have a significant negative impact on your credit score.

Tips for building and maintaining good credit

Building and maintaining a healthy credit profile and credit score requires responsible financial management. Much of it is common sense.

• Pay bills on time. Timely payments are the foundation of a good credit score. Set up reminders or automatic payments to ensure you never miss a due date.
• Monitor your credit report. Regularly review your credit reports from the three major credit bureaus to check for errors or discrepancies.
• Reduce credit card balances. High credit card balances relative to your credit limits can harm your score. Pay down your balances to reduce your credit utilization ratio.
• Keep old credit accounts open. Closing old credit accounts shortens your credit history. This can lower your credit score. It is generally a good idea to keep these accounts open, even if you do not use them often or even at all.
• Limit new credit inquiries. Be selective about applying for new credit. Multiple inquiries in a short time can be seen as a red flag. Consider applying for new credit only if you are pre-qualified or pre-approved. While this does not guarantee a successgul application, it makes it more likely.
• Diversify your credit. If you have only credit cards, consider adding to your credit mix with an installment loan.
• Debt consolidation. If you have multiple high-interest debts, think about consolidating into a lower-interest loan to make repayment more manageable.
• Seek professional help. If you are struggling with credit issues or have significant debt, consider consulting a credit counselor or financial advisor for guidance.

Credit Protection Laws

As a consumer, you are protected by laws and regulations around credit reporting and lending practices. The Fair Credit Reporting Act (FCRA) ensures the accuracy and fairness of credit reporting. Under this law, consumers have the right to dispute inaccurate information on their credit reports.

The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating against applicants based on factors such as race, color, religion, national origin, sex, marital status, age, or the receipt of public assistance.

Understanding these laws empowers can empwer you to assert your rights and hold creditors and credit reporting agencies accountable for any violations.

Crack the credit code with Sesame Grade and Sesame Ring

Credit plays a significant role in our lives and influences access to credit cards and loans, the terms of those loans, and even the ability to rent an apartment or secure a job. It is one thing to understand this, but how to manage it? Credit monitoring services can be valuable and provide consumers with regular updates on their credit scores and reports.

You can see your credit picture at a glance with Sesame Ring. The unique user interface enables easy and intuitive review of TransUnion data. Credit report information from all three bureaus is available if you choose to upgrade to Premium. In addition to data and information, the app provides a measure of overall credit health with your Sesame Grade, and provides alerts, personalized action plans and AI-driven customer support. As you embark on your journey of credit and financial health improvement, knowledge is your most potent asset. Insights from all three bureaus can help you make sound financial choices, negotiate from a position of strength, and nurture your credit health. Regular reviews enable you to maintain accuracy, detect discrepancies and shape your financial future with confidence. Remember that credit is a tool that, when used wisely, can open doors to financial opportunities.

If you enjoyed Crack the credit code and get your finances on track you may like,

• 20 good reasons to build your credit
• Why credit building just got more important
• Is a good credit score key to peace of mind?

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Crack the credit code and get your finances on track appeared first on Credit Sesame.

Imagine if a work colleague lies about you behind your back. Perhaps dishing dirt on you to your boss, landlord, bank and people who do business with you. Would you like to know what they are saying? Better yet, would you like the chance to do something about it?

What if that work colleague is, in fact, your credit report? Your credit report is used by lenders, employers and landlords as a tool to assess your creditworthiness and financial standing. It contains information about how you have handled debt in the past. Does your credit report tell the story of someone responsible and reliable? Is the information accurate? Unless you check, you cannot know.

Using credit monitoring can give you insight into how others see your creditworthiness. It also means you can catch and correct any errors, hopefully before they impact your credit score.

You never know when someone may check your credit

Your credit report is a comprehensive summary of your past and ongoing use of credit. Normally, you can get one free credit report per year from each of the three major credit bureaus. However, because of the economic impact of the COVID pandemic, the credit bureaus are allowing consumers to get one free credit report each week until the end of 2023.

Few people are going to request a credit report every week. You may check your credit when you know it is about to be checked for a specific reason, like when you are about to apply for a new loan or credit card.

However, your credit may be checked more often than you think, for example:

• When you apply for a new job, a potential employer may check your credit report to see how financially responsible you are
• Insurance companies in many states use credit history as a factor in setting premiums, both when you apply and when your policy is up for renewal
• Credit card companies base their interest rates on your credit history, and may raise your rate for new purchases if your credit score drops
• Some landlords use credit checks to screen tenants to see how good they are at making their payments on time

You may not know when your credit history is going to matter. Even if you knew when it is about to happen, you do not have time to do anything about errors. Credit monitoring is a longer-term strategy for ensuring information is accurate.

Many factors affect your credit score

You probably know that if you start missing payments, your credit score may drop. You credit score can change for other reasons.

• Carrying a high credit card balance
• Paying off a loan
• Closing an old credit card account
• Applying for new credit
• Opening new credit accounts
• Fraudulent activity

Fluctuations in credit scores are normal and often minor. Still, you risk having a significant change happen at the wrong time if there is a change in credit behavior or fraudulent activity on your account. This is where credit monitoring comes in.

What is credit monitoring?

Credit monitoring is a service designed to let you keep a close eye on your credit record without continually requesting credit reports.

Credit Sesame offers free credit monitoring that allows you to:

• Easily check your credit score
• See how much you owe on your credit accounts
• View your payment history
• Understand how much of your available credit is in use
• Help you compare the interest rates you’re being charged on various accounts
• Get timely alerts to changes in your credit status

Free credit monitoring from Credit Sesame includes a monthly report on your credit, plus alerts whenever there is a change in your credit status. The report contains the information others may use to decide your lending capacity or responsibility in financial matters. You can use the information to manage your credit more efficiently.

Use credit monitoring because …

You are more than your credit score

Monitoring your credit score can be useful. But you are more than your credit score. Credit monitoring helps you understand what’s good or bad about your credit behavior. In turn, that allows you to figure out what you can do to improve your credit score.

It gives you time to work on your credit

There are several actions you can take to improve your credit. These include clearing up mistakes on your credit report, getting current on payments, and lowering your credit utilization ratio.

Each of these tactics may take time. If you wait to check your credit just before applying for something, you may find a problem you don’t have time to address.

Credit monitoring helps you stay informed about your credit at all times. You can address problems as soon as they occur. This increases your chances of having your credit in good shape when needed.

It helps you spot unauthorized activity in your accounts

Most credit card theft involves the theft of credit card information rather than someone stealing your actual credit card.

There are many ways for thieves to get your card information without you knowing it. Credit monitoring can help you spot suspicious increases in your account balances sooner to limit the damage to your credit score.

It alerts you to unauthorized new accounts

Another way thieves can use your credit is to open a phony account in your name. This can make you liable for charges on that account, plus ruin your credit. Just opening the account may cause a hit to your credit score. As the account balance rises, your score may continue to decrease. Finally, your credit score could take an even more serious hit if account payments are missed.

You may be able to head off a lot of this trouble with credit monitoring. Receiving an alert whenever a new account is opened in your name allows you to freeze the account immediately.

We monitor our physical assets with doorbell cams, burglar alarms, computer protection software or a good old family dog. Perhaps now is a good time to help secure your credit data by adding a credit monitoring service.

If you enjoyed Use credit monitoring to avoid unpleasant surprises, you may like,

• Steps to take if you have a credit screw-up
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• How to recover from messed-up credit

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Use credit monitoring to avoid unpleasant surprises appeared first on Credit Sesame.