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Understanding Credit

What is Credit?

Credit is the ability of the consumer to acquire goods or services prior to payment with the faith that the payment will be made in the future. In most cases, there is a charge for borrowing, and these come in the form of fees and/or interest.

Establishing Good Credit

A good credit score can impact multiple areas of your life, including your ability to rent or buy a house, job opportunities, loans, and more, so establishing a good credit score now will pay off in the future.

What is Considered a Good Credit Score?

The FICO credit score ranges from 300 to 850, with the lower scores representing higher credit risk. A good credit score is generally considered to be anywhere from 690 to 850, with 850 being an excellent credit score.

Here are ways to start establishing good credit:
  • Open a checking and savings account

  • Pay bills on time

  • Pay down outstanding balances

  • Check credit report yearly

  • Protect your identity

Five Components of a Credit Score

Payment History (35%)

Ratio of Debt to Available Credit (30%)

Length of Credit History (15%)

Types of Credit Used (10%)

Recent Searches for Credit (10%)

Tip: Visit the Federal Reserve website for more helpful guides to improving your credit score.

Checking Your Credit Report

A credit report contains your personal information along with your overall credit history, inquiries made by companies to view your credit information, and more. Checking your credit report frequently will prevent inaccuracy in your credit information that may lead to a lower credit score and consequently, the denial of credit, loans, or even a job.

Tip: Remember to check the name, address, birthdate, Social Security number, and accuracy of accounts on your credit report.

Where Can You Access Your Credit Report?

When it comes to checking your credit report, there are three nationwide credit reporting agencies that will provide you with a free credit report, upon request, once every 12 months. These three agencies are:




To request a free credit report from any of these agencies, visit annualcreditreport.com or call 1-877-322-8228.

Tip: Instead of checking your credit report from all three agencies at once, spread them out every few months so that you can monitor your credit throughout the year for free. 

Learn More

To schedule a one-on-one appointment with a Bears for Financial Success peer mentor, email bffs@berkeley.edu or request a financial literacy presentation for a student group.