Understanding Credit

Credit Reports

Credit reports are like your transcripts on which creditors report your payment behaviors. There are three major agencies that track all of your credit history.

  1. Equifax
  2. Experian
  3. TransUnion

You are allowed to request a free credit report once a year. The only official website where you can do so is Annual Credit Report.

Credit Scores

If your credit report is like a transcript, credit scores are like the GPA. If your report is good, your score will be too. When you apply for credit, such as a mortgage, creditors use your score as a starting point in determining the interest rate they are willing to offer you.

According to VantageScore, the major factors impacting your score include the following:

  • Payment History: Paying on time can be more impactful than paying off the full balance.
  • Depth of Credit: Not just revolving credit such as credit cards, but installment debt such as a student loan, can show your ability to manage debt over time.
  • Utilization of Credit: If you max out your credit cards each month, you may be viewed as a risk if given more credit to spend.
  • Outstanding Balances: What is your debt-to-income ratio? Are your credit cards always carrying a balance?