The three major credit rating bureaus in the United States are Experian, Equifax, and TransUnion These agencies pay financial institutions to send them your credit data every month. including credit limits, the amount of utilized credit, and your payment history. The credit agencies use this to calculate your credit score and sell these reports to banks, credit unions, landlords, auto finance companies, and even potential employers. Unfortunately, these credit scores have become the be-all and end-all of your ability to get a loan or a credit card, not to mention the interest rate you will pay for that loan or credit card.
As was stated earlier, a FICO score of 700 or higher is golden. In 2019 67% of Americans had a FICO score of 670 or higher. The majority of Americans have a FICO score of good or better. Banks often see a FICO score of 700 or better as the “sweet spot” for them to extend credit at a reasonable interest rate. This does not mean that you cannot get a credit card or an auto loan if you have a score less than 700, but you will pay a higher interest rate, so it is worth aiming for. Your FICO score will improve if you use only 30% or less or your credit limits, so having more credit cards but not using them improves your score. That means you should get credit cards but do not use them.
The financial institutions used to report on your financial activity to the credit scoring agencies at the end of each month, but now they seem to be reporting weekly or even daily, so check Credit Karma at least every two weeks. It will give you a good sense of how credit scores fluctuate based on your activity. Most importantly, you should immediately report any errors. You can do this for free on the Credit Karma website.