Credit – Ordinary Money

Credit Scores Your foundation

A three-digit number that follows you into nearly every major financial decision. Here's what it actually means — and how to make it work for you.

→ Your action:

A credit score is a number — typically between 300 and 850 — that tells lenders how likely you are to repay money you borrow. The higher the number, the less risk you appear to be, and the better the terms you're offered.

The most common scoring model is FICO. Here's what each range means in practice:

Poor
300–579 Fair
580–669 Good
670–739 Very Good
740–799 Exceptional
800–850

Most people think credit scores only matter when getting a loan. In reality, they show up in a surprising number of places:

Loans and mortgagesYour score determines whether you qualify and what interest rate you get. A 100-point difference can mean thousands of dollars over the life of a loan.

Renting an apartmentMost landlords run a credit check. A low score can get your application rejected outright.

Car insuranceIn most states, insurers use your credit history to set your premium. Bad credit can mean higher monthly rates.

Utilities and phone plansProviders may require a deposit or deny service entirely if your credit is poor.

EmploymentSome employers — especially in finance or government — check credit as part of background screening.

FICO scores are calculated from five factors. Knowing the weight of each one tells you exactly where to focus:

Payment history — 35%The single biggest factor. Paying on time, every time, is the most important thing you can do. Even one missed payment can drop your score significantly.

Credit utilization — 30%How much of your available credit you're using. Keeping this below 30% is the general rule — below 10% is even better. If you have a $1,000 limit, try not to carry more than $300.

Length of credit history — 15%How long your accounts have been open. This is why closing old cards can sometimes hurt you — it shortens your average account age.

Credit mix — 10%Having different types of credit (cards, a car loan, a student loan) shows you can handle various forms of debt responsibly.

New credit — 10%Each time you apply for credit, a "hard inquiry" is added to your report. Too many in a short period signals financial stress to lenders.

Click any item to learn more.

✅ Helps your score

Payment history is 35% of your score — the biggest single factor. Set up autopay for at least the minimum so you never miss a due date. Even one payment 30+ days late gets reported and can drop your score 60–110 points.

Utilization is how much of your available credit you're using. If your limit is $1,000, try to keep your balance under $300. Below 10% is even better. This accounts for 30% of your score.

A secured card requires a cash deposit as collateral. Use it for small purchases, pay it off monthly, and you'll build real credit history within 6–12 months.

If a family member adds you to their card, their payment history can benefit your score — even if you never use the card yourself.

The length of your credit history matters. Keeping old cards open (even unused) maintains your average account age and your available credit limit.

Get free reports from all three bureaus at annualcreditreport.com. Errors are common — disputing them is free and can boost your score quickly.

❌ Hurts your score

A payment 30+ days late is reported to all three bureaus and can drop your score by 60–110 points in one hit. It stays on your report for 7 years.

High utilization hurts fast. Even if you pay in full each month, the balance at statement close is what gets reported. Try to pay down balances before your statement date.

Closing a card reduces your total available credit (raising utilization) and can shorten your credit history. Unless a card has a fee you can't justify, it's usually better to keep it open.

Each credit application triggers a hard inquiry, which temporarily drops your score a few points. Multiple applications in a short window signal financial stress to lenders.

Debt settlement shows up on your report for 7 years and signals you didn't honor your original agreement. A payment plan at full value is almost always better for your score long-term.

Errors and fraudulent accounts are more common than people realize. If you're not checking, they can drag your score down for years without you knowing.

Credit Tools Your focus

Calculators to see exactly where you stand and what to do next.

→ Start here:

💳 Credit Utilization Calculator

Enter each credit card's limit and current balance. See your utilization per card and overall — and what it means for your score.

Card name (optional)

Credit limit ($)

Current balance ($)

Overall utilization

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Balance: — / Limit: —

Under 10%Excellent

10–29%Good

30–49%Fair

50%+Hurting you

📈 Credit Building Timeline

Pick where you're starting from and see a realistic, month-by-month path to Good or Excellent credit — with specific actions you can take today.

Credit Cards

Credit cards are one of the most powerful financial tools available — and one of the most dangerous if misused. Here's how to choose one wisely and use it to your advantage.

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Used right, a credit card is essentially free money for 30 days, builds your credit history, and gives you rewards on spending you'd do anyway. Here's what makes them valuable:

Build credit passivelySimply using a card for everyday purchases and paying it off monthly is one of the most effective ways to build a strong credit history over time.

Purchase protectionMost cards offer fraud protection, purchase dispute rights, and extended warranties that debit cards don't. If something goes wrong with a purchase, your card company can fight for you.

Rewards and cashbackMany cards give 1–5% back on purchases. If you're paying a bill anyway, getting 2% back is free money — as long as you're not carrying a balance.

Travel benefitsSome cards offer travel insurance, rental car coverage, airport lounge access, and no foreign transaction fees — perks that can easily outweigh an annual fee.

The golden rule: If you'll carry a balance, the interest rate (APR) matters most. If you pay in full every month, rewards and perks matter most. Never let the rewards tail wag the interest dog.

APR (Annual Percentage Rate)

The interest rate you'll pay on any balance you carry. Average credit card APR in 2024 is around 21%. Look for 0% intro APR offers if you need to carry a balance temporarily, but know when the promotional period ends.

Annual fee

Many great cards have no annual fee. Premium cards with fees ($95–$550/year) make sense only if the rewards and perks genuinely exceed the cost — do the math before signing up.

Rewards structure

Flat-rate cashback (e.g. 1.5% on everything) is simple and predictable. Category cards (e.g. 3% on groceries, 2% on gas) reward you more in specific areas. Pick what matches how you actually spend.

Credit limit

A higher limit isn't an invitation to spend more — it's an opportunity to keep your utilization low. A $5,000 limit means you can spend $500 and still be at a healthy 10% utilization.

Foreign transaction fees

Usually 1–3% on purchases made abroad or in foreign currencies. If you travel at all, look for a card that waives these.

Sign-up bonus

Many cards offer $150–$500 in value if you hit a spending threshold in the first few months. Worth considering, but don't spend money you wouldn't otherwise spend just to chase a bonus.

Credit cards are designed to make spending easy. The risks are real, but they're avoidable if you know what to watch for.

Interest compounds fastAt 20% APR, a $1,000 balance left for a year becomes $1,200. Leave it for five years making only minimum payments, and you'll pay the original balance several times over.

Minimum payments are a trapPaying the minimum keeps you out of default — but it barely dents the principal. Credit card companies set minimums low on purpose. Always pay more than the minimum if you can.

Cash advancesWithdrawing cash on a credit card typically charges a fee (3–5%) plus a higher interest rate that starts accruing immediately — no grace period. Avoid unless it's an emergency.

Overspending for rewardsEarning 2% cashback on $500 you didn't need to spend is a $490 loss. Rewards only make sense on spending you'd already do.

Missing the due dateEven one late payment triggers a late fee (typically $25–$40) and can void any 0% promotional rate. Set autopay.

Retail store cardsStore cards often have APRs of 25–30% and limited use outside the store. The discount at checkout rarely makes up for the long-term cost if you carry a balance.

Spend only what you already have in your bank account. Pay the full balance every month. Set autopay so you never miss a due date. If you can follow these three rules, a credit card is a free tool that builds your credit and pays you back for normal spending.

Cards Worth Considering

A shortlist of well-regarded cards across different needs. We don't earn referral fees — these are included because they're genuinely good options for most people.

Where are you in your credit journey?

⭐ Recommended

Active Cash®

Wells Fargo

BEST FOR SIMPLICITY

Wells Fargo Active Cash®

Flat-rate cashback, zero fuss

2% cash back on every purchase — unlimited

✅ Pros

No annual fee
$200 sign-up bonus*
0% intro APR 12 months
Simple — no categories

❌ Cons

3% foreign transaction fee
No travel perks
Needs good credit

⭐ Recommended

Discover it® Cash Back

Discover

BEST FOR BEGINNERS

Discover it® Cash Back

First-year cash back match + 0% intro APR

5% on rotating categories · 1% everything else

✅ Pros

No annual fee
Cashback matched year 1
0% intro APR 15 months
No foreign fees

❌ Cons

Must activate categories
5% capped at $1,500/quarter
Less accepted abroad

⭐ Recommended

Freedom Unlimited®

Chase

BEST FOR DINING

Chase Freedom Unlimited®

Elevated rewards on the things you buy most

5% travel · 3% dining · 1.5% everything else

✅ Pros

No annual fee
$200 sign-up bonus*
Strong dining rewards
Pairs well with Sapphire

❌ Cons

3% foreign transaction fee
Travel bonus only via Chase
Needs good credit

⭐ Recommended

Sapphire Preferred®

Chase

BEST FOR TRAVEL

Chase Sapphire Preferred®

The go-to first travel card for most people

3x dining · 2x travel · flexible points

✅ Pros

60,000 pt sign-up bonus*
Trip cancellation insurance
No foreign transaction fee
Points transfer to airlines

❌ Cons

$95 annual fee
Needs good–excellent credit
Points system has a learning curve

⭐ Recommended

Double Cash®

Citi

BEST 2% CARD

Citi Double Cash®

2% back, but only when you pay your bill

1% when you buy · 1% when you pay · = 2%

✅ Pros

No annual fee
Effective 2% on everything
Long-standing reliable card

❌ Cons

3% foreign transaction fee
No sign-up bonus typically
Rewards require paying bill

⭐ Recommended

Quicksilver®

Capital One

BEST FOR NO FEES

Capital One Quicksilver®

Simple rewards with no foreign transaction fees

1.5% cash back on every purchase

✅ Pros

No annual fee
No foreign transaction fee
$200 sign-up bonus*
Easy to qualify for

❌ Cons

Only 1.5% vs 2% elsewhere
No bonus categories
Limited travel perks

* Sign-up bonuses and APRs change frequently. Always verify current offers on the card issuer's website before applying.
Ordinary Money is not affiliated with any card issuer and earns no referral fees.