 TITLE: How to Get Started With Credit for the First Time CONTENT: Understand How Your Credit Score Is Calculated\n----------------------------------------------\nYour credit score may look like a simple three-digit number, but it's determined by math formulas that consider many different financial factors. Ultimately, a credit score is an attempt to summarize your history with borrowing and repaying debts. Here are the main components that go into calculating your credit score:\n*   **Payment history**: When you pay your bills on time, you help build a positive credit history that can lead to an increase in your score. If you make late payments or miss them altogether, it can drag your score down.\n*   **Credit utilization ratio**: This measures how much of your available credit you are using at any given time. In other words, how much debt you're carrying compared with how much credit you have. Find this by dividing a card's balance by its credit limit. A credit utilization ratio above 30% can more seriously harm your credit scores, so aim to keep your utilization as low as possible.\n*   **Length of credit history**: Lenders and credit scoring models look at how much experience you have with borrowing when they assess your creditworthiness. When you're new to credit, you'll lack a robust credit history—but it's something you'll build over time simply by maintaining your accounts and paying your bills on time.\n*   **Credit mix**: Your credit score benefits from having multiple types of credit, in part because this shows you have experience with various types of borrowing. For example, having both loans and credit cards can help more than having just credit cards. This factor plays a minor role in your score, however, and you shouldn't take out new forms of credit for that reason alone.\n*   **New credit**: When you apply for new credit accounts, a lender will pull your credit report and scores to decide whether to approve you. When this happens, it adds something called a hard inquiry to your credit report. Lenders and credit scorers can see these on your credit report, and they may negatively impact your scores slightly for up to a year.\nIt's also important to understand the types of financial accounts that impact your credit scores. Checking and savings accounts do not play a role. Instead, your credit file focuses on the accounts you've opened to borrow money. These come in two forms:\n*   **Installment credit**: This is a loan in which you borrow a set amount and repay in fixed monthly installments with interest. Once you've repaid the loan in full, you're done with it. Examples include personal loans, auto loans, mortgages and student loans.\n*   **Revolving credit**: This type of credit includes credit cards and lines of credit. Rather than providing a lump sum that you repay over time, revolving credit allows you to borrow repeatedly up to a given limit and repay it in variable amounts. You only pay interest on what you use. END