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The Resource Center Child Identity Theft & Protection | article

Explaining What a "Good Credit Score" Is to High School Kids

While parents often discuss complex issues with their children, many fail to discuss financial topics openly. Adding to this taboo may be that many moms and dads across the country aren't well-versed when it comes to topics such as credit reports and scores*. Moms and dads who are helping their high school kids achieve affordable loans for college in the future may want to brush up on this subject.

One key aspect to understanding interest rates parents and their children will receive when borrowing is knowing the ways different credit reporting agencies measure credit scores. For example, here are a few details about FICO and VantageScore scores.

What makes a good credit score on the FICO model
According to the Fair Issac Corporation, the company that puts out FICO scores, a good credit score lies on the high end of its 300 to 850 range. By using mathematical formulas that access a number of factors, FICO gives lenders a simple score that conveys how student or parent borrowers are able to handle their money.

Factors that influence this score include:

  • Amounts owed — outstanding balances on loans or credit lines
  • Length of credit history — assesses the amount of time a borrower has maintained good payment habits
  • New credit — includes recently opened accounts or loan extensions
  • Payment history — includes any late payments or adverse actions that may affect a lender's decision to extend funds to the borrower
  • Types of credit used — evaluates closed accounts along with those currently in use.

What makes a good credit score on the VantageScore model
Like the FICO score, the VantageScore model uses similar factors such as recent credit and payment history to assess a borrower regardless of age. However, the weight the three major credit bureaus — who issue this score — give to these factors varies.

The VantageScore model is on a scale of 501 to 990, with the higher numbers indicating a more responsible borrower. To make it easier for parents and young borrowers, consumers who check this version of this score will find a letter grade accompanying their three-digit number.

Establishing credit
Moms and dads should teach their children how to check their credit report for signs of identity theft, and help them establish good repayment habits on car loans or credit cards. This way, when their children need to take out a loan for school, they can do so responsibly.

*The scores you receive with Identity Guard® are provided for educational purposes to help you understand your credit. Lenders use many different credit scoring systems, and the scores you receive with Identity Guard are not the same scores used by lenders to evaluate your credit.

Credit scores are provided by CreditXpert based on data from the credit reporting bureaus.