Financial Education · Credit & Debt

Credit

Your credit score is a three-digit number that controls your cost of borrowing for decades. A 760 vs. a 620 isn't just a number — it's tens of thousands of dollars in interest on a mortgage, whether you get approved for an apartment, and the difference between a 5% car loan and a 14% one. Most people treat credit as something that just happens to them. It's actually a system with clear rules, and once you understand the rules, the score becomes something you manage with intention.

What it covers

The FICO score (the one lenders actually use) has five components: payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%). Utilization is the percentage of your available credit you're using — keeping this below 30% matters, below 10% is better. Payment history is the biggest factor: pay on time, every time. A secured credit card is the most reliable tool for building credit from zero. Hard inquiries (when a lender checks your credit for a loan application) temporarily lower your score; soft inquiries (like checking your own score) don't affect it at all.

Why it matters

A 1% difference in mortgage interest rate on a $400,000 home is roughly $250/month. Over 30 years, that's $90,000. Your credit score is one of the highest-ROI things you can improve in your 20s because the math compounds every time you borrow. Good credit also affects things you might not expect: some employers check it for certain roles, landlords use it for rental applications, and insurance companies in some states use credit history to set premiums. Bad credit costs you money silently in ways that add up for years.

Key terms

FICO Score

The most widely used credit scoring model, ranging from 300 to 850. Below 580 is poor. 670–739 is good. 740+ is very good. Lenders use this to determine loan eligibility and interest rates.

Credit Utilization

The percentage of your total available credit that you're currently using. Keeping this below 30% helps your score; below 10% is ideal. Calculated both across all cards and per individual card.

Payment History

Whether you've paid your bills on time, every time. The single biggest factor in your FICO score at 35%. One missed payment can stay on your report for 7 years and significantly damage your score.

Hard Inquiry

When a lender pulls your full credit file to evaluate a loan or card application. Temporarily lowers your score by a few points. Stays on your report for 2 years. Multiple mortgage or auto inquiries in a short window usually count as one.

APR (Annual Percentage Rate)

The yearly cost of borrowing, including interest and fees. A card with 24% APR costs 2% per month on any balance you carry. Paying your full balance monthly means you pay 0% effective interest.

How GenHedge connects

Credit doesn't appear in GenHedge's market verticals directly — but macro conditions connect to it constantly. When the Fed raises interest rates, the prime rate rises and credit card APRs increase. When the 10-year Treasury yield moves, mortgage rates follow. When you watch the Macro and Bonds verticals in the daily newsletter, you're watching the forces that determine what borrowing costs you personally.