00:00What are you gonna order? I'm thinking tacos.
00:07Hey, have you checked your credit score recently?
00:09What, you think I can't afford tacos?
00:11No, I was just curious.
00:13Oh, you just...
00:14Well, yeah, I have checked it recently and I got like a hundred, you know, which my guy says it's one of the highest scores he's ever seen.
00:22So, you know, Taco Tuesday, here I come.
00:25What, you don't like tacos or something?
00:28No, your guy? Come on. Everyone knows that the highest credit score that you can get is a thousand.
00:34That's what I meant. I messed up the words. It was a flub. You know, when I said a hundred, I just forgot the other zero. Different word. Thousand credits is what I meant to say. Totally got a thousand credits.
00:45Okay, so to be clear, credit scores don't go up to a thousand. The scale runs from 300 to 850. And while I'm at it, there are a few other things you should know, too.
00:56A credit score is a portrait of someone's credit history made up of several factors that we'll cover in a moment.
01:11This number is placed on a scale that helps prospective lenders evaluate how likely you are to pay your debts.
01:17This, in turn, determines what kinds of loans you can get.
01:20There are five factors that determine your score, and they all have varying levels of importance.
01:25Payment history is the most important piece of your credit profile, and it accounts for roughly 35% of your score.
01:32Makes sense, too. If you've been responsible in the past, you can probably be trusted in the future.
01:36So avoid late payments at all costs.
01:39Amounts owed, or credit utilization, is the second most important factor coming in at about 30% of your score.
01:47Now, this part is important because notching a good credit score doesn't mean that you don't borrow.
01:53In fact, not using your credit is almost worse than using tons of it.
01:57You want to show that you can handle a reasonable amount of debt without going off the rails.
02:01One of the more obvious factors in a credit score is the length of your credit history, which counts for 15% of your number.
02:08It's like in those old movies where a shop owner lets one of his regulars run up a tab because he knows he's good for it.
02:14Same goes with credit. The longer you've been borrowing, the better.
02:17Finally, types of credit and new credit, each account for 10%.
02:22Types of credit reviews how many sources of borrowing you use, like a car loan, mortgage, and credit card.
02:28The more diverse, the better.
02:30New credit takes into account how often you take on credit you don't need, like applying for a credit card at five of your favorite new stores.
02:38So while you can't have a credit score of 1,000, you can make sure you're taking the right steps toward a great credit score.
02:46Come to think of it, I think tacos do sound pretty good right about now.
02:49Hey there! I'm thinking we should see more of each other. If you'd like to watch more of my explanations, subscribe to Mashable's YouTube channel. Right there.
02:59.
03:09.
03:11.
03:15.
Comments