Step 1: Understanding Credit & Why It Matters
Credit can be one of the most useful tools in your financial toolbox. When you understand how it works and how to manage it well, it can help you reach your goals sooner, save you money, and give you more confidence in making financial decisions.
What Is Credit, Exactly?
At its simplest, credit is the ability to borrow money now and pay it back later. Your credit score is a three-digit number, typically ranging from 300 to 850, that tells lenders how reliable you are at repaying borrowed money. The higher your score, the more favorably lenders see you.
Your score is a mix of five key factors, each with a different level of importance:
- Payment history (35%): Do you pay your bills on time? This is the most important factor.
- Credit utilization (30%): How much of your available credit are you using? Experts recommend keeping this number below 30% to show responsible use.
- Length of credit history (15%): The longer your accounts have been open, the better.
- Credit mix (10%): Do you have a healthy mix of different types of credit (e.g., credit cards and an installment loan)?
- New credit (10%): How often you apply for new credit and open new accounts. Too many applications in a short period can lower your score.
Why Good Credit Matters
People often think credit only affects whether you get approved for a loan or card, but it does much more than that. Strong credit can:
- Help you qualify for lower interest rates, which means paying less over time
- Increase your approval odds for apartments or rental homes
- Lead to lower insurance premiums in some cases
- Give you access to higher credit limits when you need them
- Provide more choices when you're shopping for financial products
Common Questions About Credit
Do I need a credit card to have credit?
Not necessarily, but credit cards are one of the easiest ways to build credit when used responsibly.
Will checking my own credit score hurt it?
No. Checking your own score is considered a soft inquiry and has no impact.
How long does it take to improve my score?
It varies, but consistent on-time payments and lowering your balances can start showing results in a few months.
As a BrightBridge member, you can track your credit score right in
online banking. Checking regularly can help you stay motivated and spot progress along the way.
How to Check Your Starting Point
Knowing your current score and report is the best first step before applying for credit. You can get a free credit report from each of the three major bureaus once a year at AnnualCreditReport.com.
Review your report for:
- Accuracy: Make sure your personal information is correct.
- Accounts: Verify that all accounts listed belong to you.
- Payment history: Confirm that your payments are reported correctly.
- Errors or fraud: Dispute any incorrect information promptly.
Action Steps for This Stage
- Get your current credit score and review your credit reports.
- Identify any areas for improvement, such as high balances or late payments.
- Set a goal for your score based on your next financial milestone — for example, qualifying for a certain mortgage rate or opening a rewards credit card.
In the next step, we will explore how to choose the right credit card for your needs, whether you are building credit for the first time or looking to maximize rewards.
Next: Step 2: Choosing the Right Credit Card for You
