ChatGPT is being talked about constantly, but some people might still be wondering exactly how to use it. One thing ChatGPT does really well is simplify concepts.
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For example, we all vaguely know what a credit score is, but the extent of what it determines and how it’s calculated is a little murky sometimes. To clear things up for inquiring minds, I asked ChatGPT to start with the basics and answer exactly what a credit score is and how to build one.
Let’s Start Small: What Is a Credit Score?
I asked ChatGPT to explain what a credit score is to me as if I was 12 years old. This is a good trick you can use when you want anything broken down in simple-to-understand terms. ChatGPT used concepts that a 12-year-old could relate to in order to explain what a credit score is:
“A credit score is like a school grade, but for money. It shows how good you are at paying back money you borrow — like when you use a credit card or take out a loan. If you always pay on time and don’t borrow too much, you get a high score (like an A+). If you miss payments or owe too much, your score goes down (like getting a D or F).”
“Banks and companies use this score to decide if they can trust you to borrow money,” ChatGPT continued. “A higher score makes it easier to get things like a car loan or even a new phone plan.”
That gives you a basic overview of what a credit score is. Then, ChatGPT asked if I wanted to know how to build a credit score, so I took it up on the offer.
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How ChatGPT Says To Build a Credit Score
ChatGPT gave an easy to follow six-point plan on how to build credit. The first step was to get a credit card or a small loan. Underneath this point, ChatGPT suggested getting a secured credit card where the user pays a deposit before utilizing it. It also suggested being added as an authorized user on someone else’s card, like a parent or a partner.
Next, ChatGPT said to use the credit, but “only a little.” It suggested paying for only gas or groceries with the card or loan. It rounded out this point by saying to try to use 30% or less of one’s credit limit.
The third point, or as ChatGPT said, the “most important point,” was to pay one’s credit bill off every month. It added “Even one late payment can hurt your score,” which helps answer the question of what can influence a credit score for people new to the concept.
ChatGPT’s fourth point was to not open too many accounts at once. “Every time you apply for credit, your score dips a little — so space it out.” This is helpful, though I wish it would have explained why, or how often is wise to open new accounts.
The fifth point was to “Leave accounts open (even if you don’t use them much).” ChatGPT explained that the longer one’s credit history, the better a person’s score. This is great, but again, it would be nice to know how often a person could open accounts.
The final point was to check credit reports “for mistakes.” This kind of implies that mistakes are the only reason to check a credit report, which was a little misleading. The upside was that ChatGPT did suggest a site (annualcreditreport.com) where users can get free credit reports.
How Often Does ChatGPT Say a Person Should Open New Credit Lines?
Just because I was curious, I followed up on the question I had before. ChatGPT gave a very clear and concise answer: “A person can open new credit lines as often as they want, but it’s best to limit it to 1-2 new credit lines every 6-12 months, or fewer if you’re building or repairing credit.”
ChatGPT went on to explain why, and how too many inquiries can reduce credit score. All in all, I think ChatGPT gave a great overview as to how credit scores work.
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