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Questions you should be asking about your credit score

This article originally appeared on BuzzFeed.

Let's be honest for a second: Credit can be confusing. Is it good? Is it bad? How does one build credit? What's a credit score? Can someone please explain what a "hard inquiry" is?

If you've got credit questions, there's good news: Mical Jeanlys, Managing Director, General Manager at Chase Card Services, has the answers! Here are nine of the most common questions about credit.

1. What is credit?

Generally, "credit" refers to a contractual agreement in which a borrower receives money from another person or institution (usually a bank) with an agreement to pay the money back sometime in the future, typically with interest. For the most part, when people talk about their "credit," they're talking about their credit history, which is a record of their credit usage.

"When you apply for a large loan, such as a mortgage, automobile loan, or small business line of credit, lenders like Chase will take into account a number of factors, including your credit history," explains Jeanlys. "A positive credit history may make it easier to get these services because it is an indication that you are financially responsible and have a good track record of paying bills on time."

2. What if I'm not planning to apply for a loan? Does my credit still matter?

Yes. "Your credit history may come into play in other areas of your life," says Jeanlys. "Property rental agencies, mobile phone companies, insurance companies, and employers can all use credit reports."

3. How do I find out if I have good credit?

You need to find out your credit score.

"A credit score," explains Jeanlys, "is a number calculated by a private company to determine your creditworthiness. [It's] calculated based on the information on your credit report."

According to Jeanlys, "Financial services companies are increasingly offering consumers their credit scores."

4. What if I know my credit score but I don't know what the number means?

Considering that credit scores are just three-digit numbers, it's reasonable to find them confusing at first. VantageScore, one of the major credit scores, ranges from 300-850, and a score of 720 or higher is considered very good. But even if your score is outstanding, don't get complacent. "It's important to remember that different lenders have different standards," Jeanlys says, "so keep building up your score to ensure financial success."

5. Does having a credit card help or hurt if I'm trying to build credit?

Credit is a bit of a catch-22: You have to use it to prove you can be trusted with it.

"A credit card allows you to establish and build a record of credit usage," says Jeanlys. If you use the card and pay your bill on time, you're demonstrating to lenders that you're financially responsible.

"Paying bills on time is an important factor when it comes to calculating your credit score," explains Jeanlys. "As such, missing credit card payment deadlines or paying less than the minimum payment requirement can negatively impact your score."

In short: Credit cards can help you build credit as long as you use them responsibly.

6. I'm not happy with my credit score and want to improve it. What should I do?

First, be realistic. Improving your credit score takes time, and the best way to rebuild credit is to manage it responsibly. However, there are steps you can start to take immediately, including:

  • Paying your bills on time: Payment history is an important factor when it comes to calculating your credit score. So, if you struggle with meeting payment deadlines, it's time to set up some reminders or enroll in autopay.
  • Paying down your debt: Your credit utilization—meaning the size of your card balance—is another big factor. If you're carrying debt, consider creating a payment plan that prioritizes paying down high-interest debt first.
  • Checking your credit report: Remember, knowledge is power. If you check your credit report regularly, you'll be in a better position to spot and remedy any errors.

7. I've heard that checking your credit score can make it go down. Is that true?

Yes and no. It comes down to the difference between "soft inquiries" and "hard inquiries."

Soft inquiries occur when you check your own credit report, when your credit report is checked as part of a background check, or when a financial institution administers a pre-approved credit card/loan offer. Soft inquiries do not negatively affect your credit score.

However, when a lender makes an inquiry (such as a request for your credit report information), there is a small impact on your credit score. These inquiries, which can happen when you apply for new credit or a loan, are called "hard inquiries." But their impact begins to fade after the first 12 months, and they drop off your credit report completely after two years.

8. If I'm shopping around trying to find the best rate for a mortgage or car loan, is that going to destroy my credit score?

"If you are applying for a mortgage or car loan and 'rate shopping,' it's likely that several lenders will check your score around the same time," Jeanlys says. "In that case, as long as all the inquiries fall within a 30-day period, they'll only be treated as one inquiry and won't have an impact on your score."

9. How do I know if I have the right credit card for my needs?

As your needs change, your credit cards might follow suit. "If you've racked up a large balance on a variable rate card, consider transferring that balance to a no-fee, low- or zero-interest credit card that can offer some relief as you pay it off," Jeanlys explains. "Or, if you plan to travel extensively in the coming year, consider applying for a card that offers travel rewards and allows you to get the most from those purchases."