Speaker 1: Meet Jasmine. Jasmine is a college student attending State University. Like many college students, Jasmine has seen a lot of her friends and family use credit, whether it's through a mortgage, a private student loan, or simply a credit card. However, Jasmine has always been too afraid to use credit herself, leaving her with no credit history and a non-existent credit score. What should Jasmine do? Well, beyond watching our two other introductory videos centered around credit, Credit Cards 101 and Loans 101, her next step is simple. Understand her credit report and score. A credit report is straightforward. It's essentially a detailed history of your credit, covering everything from your payment history to the age and status of your accounts, as recorded by the three major credit bureaus in the United States, TransUnion, Experian, and Equifax. As you can imagine, this is quite a lot of information for anyone to process, so one company actually created a simple way to summarize this information, called a FICO credit score. This is a calculated number between 300 and 850 that summarizes your credit report. The higher your score, the lower the interest rates and the better the rewards you'll get from banks. Plus, a high credit score is also vital for a number of other things, like getting affordable insurance, finding an apartment, or even qualifying for a cell phone plan. Ironically, for such an important number, getting your credit score actually used to be quite difficult and expensive, but now we recommend a website that makes it free and easy for you to get your credit score and report online. This is great for Jasmine, but she's still confused about one last thing. What exactly makes up a credit score? Well, a credit score is actually made up of five components, and from understanding each you can derive the four major ways to improve your credit score. Part 1. Payment History. 35% of your score. Because this is such a large number, it reveals the importance of paying every bill on time, even if it's just the minimum. If you're struggling with this, we highly recommend setting up automatic payments for everything, especially your credit card. Part 2. Credit Utilization. 30% of your score. To avoid damaging this, we recommend not exceeding more than 30% of your maximum credit line, both total and for each individual account. If you're struggling with this, try paying off your balance early a few times a month, or try asking your bank for a credit line increase. Part 3. Length of Credit History. 15% of your score. The existence of this component means, rather counterintuitively, that you shouldn't close out your old credit card accounts unless you absolutely have to, as otherwise you'll hurt your credit score. Part 4. Recent Inquiries for Credit. 10% of your score. This one's simple. Don't apply for new credit cards and loans unless absolutely necessary, as each credit inquiry will slightly lower your credit score by a few points for the next 12 months. Finally, part 5. Types of Credit Used. 10% of your score. Unfortunately, we just don't have a rule for this one, as we don't recommend applying for multiple types of credit just to boost your score. Finally, before we conclude, we just have two more things for Jasmine to keep in mind. One, to build a credit history, and thus a credit score, you need to use credit. And the easiest way to do this is to open a credit card, like a secured or student credit card, that are designed specifically for people with no credit history. And don't worry, we teach you everything you need to know in our two videos, Credit Cards 101 and How to Rebuild Your Credit. Two, be sure to check your actual credit report for mistakes at least once a year, as these errors can dramatically affect your credit score. Should you find one, be sure to contact the credit bureau as soon as possible. Hopefully you and Jasmine now better understand how credit scores and reports work. Be sure to check out our next videos, which cover common mistakes and best practices for credit cards and loans. And be sure to check out our website, where you can find more educational content, your free credit score, and great credit card recommendations.