Students should learn about credit scores | Education

Knowing how credit scores work is important information for students, according to KHEAA.

Your credit score is a three-digit number that has a lasting effect on your purchasing power. You want to establish a good credit rating so you can tap into resources to buy a car or a house, or if you have another expensive need. A good credit score can open doors, but a bad one can make any transaction or loan more difficult and expensive. That’s why it’s important to learn how credit scores work and how they can affect your lifestyle.

Although there are several scoring methods, the most widely accepted comes from FICO. Your FICO score ranges from 300 to 850. These elements make up your FICO score:

• 35% is based on your payment history. Early payments will have a higher number than on-time payments, which will score higher than late payments.

•30% is based on outstanding debt. This unpaid debt is the amount you owe on loans, mortgages, credit cards, etc. Having lots of credit cards can hurt your score, especially if you’re close to your borrowing limit.

• 15% is based on how long you have had credit. The longer you have been borrowing and making payments on time, the better your score.

•10% is based on new credit. Opening multiple new accounts will negatively affect your score. Also, the more inquiries you have on your credit report in a year, the lower your score will be.

• 10% is based on the types of credit you currently have. It helps to have a mix of loan types. If you have a credit card, an installment loan will even out the credit.

KHEAA is a non-profit public agency established in 1966 to improve student access to university. It provides financial aid and financial literacy information at no cost to students and parents.

KHEAA also helps colleges manage their student loan default rates and verify information submitted on the FAFSA. For more information about these services, visit

In addition, KHEAA disburses Advantage Education Private Loans on behalf of its sister agency, KHESLC. For more information, visit

Kayleen C. Rice