8 Most Commonly-Asked Credit Questions

Good credit is essential for our financial stability and prosperity. But how do you go about building it?

Below, we answer the most commonly-asked credit questions to help you get started.

How to Get a Credit Card?

If you want to get a credit card with good terms, there are a few things you'll need to do.

First, you have to build a good credit score. This shows lenders that you've managed your credit responsibly in the past and that you're likely to do so in the future.

You can still get a credit card if you have a bad score, but you may have to pay a higher interest rate. Alternatively, you can save up for a deposit and get a secured credit card. That’ll help you raise your score.

Next, you need to choose the most suitable type of card for your needs. If you have questions about the different types of credit cards, read our guide.

Finally, compare the terms different issuers offer—APR, fees, rewards programs, and so on. Read the fine print for hidden fees and deferred interest.

Weigh the pros and cons and choose the option that best fits your needs.

What Happens if I Overpay My Credit Card Balance?

Wait, can you even overpay a credit card?

Yes, you can make a payment larger than your balance. If you overpay by a little, you have nothing to worry about.

Large overpayments could be treated as a fraud trigger. In that case, the credit card company will look for answers. If you simply contact the issuer and explain the mistake, you’ll avoid the hassle.

The issuer will credit the overpayment to your account, and you'll have a negative balance. Still, that won't increase your credit score. It’ll show up in your report as a zero balance.

The issuer won’t reduce your next monthly payment either. Instead, it’ll let you use the credit on new purchases. Once your balance returns to zero, you’ll be back to your regular credit limit.

If that doesn’t work for you, you can contact your issuer and request a refund.

What Is a Statement Credit?

Statement credit is money you get back from your credit card issuer. Usually, that’s from bonuses like cash back, or travel rewards redemption.

The credit card company will add the amount to your balance. If you receive more than you’ve spent, your balance will be negative.

In that case, you can either use the money to cover new purchases or request it via check.

Not all issuers offer that option, though. To find out your card's terms, you need to direct any questions to your credit card company.

What Is a FICO Score and Why Is It Important?

Your FICO score is a type of credit score. It is a number calculated based on your credit history. Lenders use it to determine your creditworthiness.

It ranges from 300 to 850. The higher your score, the more likely you will be approved for credit with better terms.

The five factors used to calculate your FICO score are your payment history, credit utilization, credit mix, length of credit history, and new credit inquiries.

How to Raise My Credit Score?

This is one of the most commonly asked credit score questions.

If you want to raise your credit score, you can do a few things.

First, pay all your bills on time. This includes credit card payments, student or auto loans, and even your utility bills.

Late payments have a big impact on your credit score, so it's essential to stay on top of them.

Also, try to keep your credit utilization rate low. That means never using more than 30% of your available credit.

But most importantly, if you have any collections accounts on your credit report, focus on repaying them first.

They drag down your credit score. So, whatever you do to improve it will have little impact as long as you have them in your report.

Is Checking My Credit Score Bad?

There's a lot of confusion out there about credit score inquiries. One of the most common credit score questions is whether checking your score will lower it.

The answer is—it depends.

There are two types of credit inquiries—soft and hard.

A soft inquiry is when you check your own credit score. It has no impact on your credit score. What’s more, it is only visible to you.

A hard inquiry occurs when you apply for new credit and the lender checks your score. It lowers your credit score by a few points, and its impact is temporary.

So, you should avoid applying for several new accounts in a short period of time. Each check will be reflected in your report and lower your score.

How Often Should I Check My Credit Score?

The answer depends on your personal financial situation.

If you are planning a big purchase, like a house or a car, you should check your credit score beforehand. If it’s low, try to improve it first.

If you’re working on your credit, you should check your score every six months to track your progress. That’s approximately how long it takes to see changes.

If you simply want to be informed about your financial situation, checking your credit score once a year should suffice.

Last but not least, checking a credit report is a good way to track your credit history. Plus, you can detect potential errors or signs of fraud on time.

How Can I Get a Free Credit Report?

Credit reporting agencies can provide you with one free credit report per year upon request.

You can request it online, by phone, or via email. To access it, you will need to provide your name, address, Social Security number, and date of birth.

Once you receive your report, review it carefully for any inaccuracies. If you find anything suspicious, direct your questions to the credit reporting agency. You can also contact it to dispute errors.