I heard my credit score is important. How do I figure out what my credit score is and how can I improve it? —Haley V. ’20, risk management and insurance major

Erkis: Yes, your credit score is important because it will determine if you will be able to get future credit (like a credit card or loan) and how much you will pay in interest. A person has a credit score from three companies (Experian, TransUnion and Equifax). According to Experian.com, 21% of those with credit scores have an “Exceptional” score of 800 – 850, 25% are “Very Good” with a score of 740 – 799, 21% are “Good” with a score of 670 – 739 and 33% have a “Fair or Poor” score of less than 670.

The exact way the score is computed is secret, but all of these companies use the same basic information when determining a person’s credit score. The most important information used is on-time payments, meaning if the person is making at least the minimum payment on their outstanding credit on or before the payment due date. It is critical for one’s credit score to pay every bill on time. Other important items are the amount of credit used by the person (lower is better), the oldest credit line still active (longer is better), the number of recent inquiries and the number of new accounts recently opened (fewer is better for both).

It is hard to improve your credit score without obtaining credit in some way. If you do not have a credit card, you can start building a credit history by putting electric bills or phone bills in your name. The major credit rating companies are starting to allow people to use their payment history on these types of accounts to improve their credit scores.

The law requires the credit rating companies to provide a free report on your credit score. I would suggest everyone check this at least once a year to see what it says. Most of the companies have simulators and ways to improve your credit score that are personalized to your situation. They can be helpful to identify ways to improve your score. I also strongly recommend getting alerts from the credit agencies when there are changes to your credit report so you can protect yourself against identity theft.

Lubomirski: For many college students, credit seems like a faraway concept that doesn’t need to be worried about yet. However, I can see the benefit of building up my credit now so I have a good score when I want to rent an apartment or get a loan in the future. I like the idea of getting a credit report for free and went to Credit Karma to do just that. The whole process took less than 10 minutes and involved making an account and answering some basic background questions about myself. Then, my credit score simply showed up on the screen. It was actually pretty good! Credit Karma also gave me some tips on how to improve my score, which, in combination with the above suggestions from Professor Erkis, provides a clear path for what I should do next.

Nothing stated in this column should be considered investment advice or an offering of securities. Stock investing has risk and you should do your own research before investing.