Understanding Your Credit

Credit History, Credit Use, and Credit Score

Mobile Phone with Credit Score on Screen

Angela Boswell |
Posted on Oct 28, 2021

We hear a lot about credit---credit history, credit reports, credit scores, credit monitoring. Your credit matters because it affects your ability to get a loan, housing, insurance, and more. It’s important to understand what your credit is and how to protect it.

When people refer to your credit, they mean your credit history. Your credit history describes how you use money. For example, a credit history would include the number of credit cards or loans you have and whether or not you pay your bills on time. How you handled your money and bills in the past will help lenders decide if they want to do business with you. Your credit history also helps them determine what interest rate to charge you.

Your credit report is a summary of your credit history. The three major credit bureaus--- TransUnion, Equifax and Experian---collect credit and other information about you. In your credit report, you’ll find information like your name, address, and Social Security number; your credit cards; your loans; how much money you owe; if you pay your bills on time or late; and, if you filed for bankruptcy in the past.

Other businesses pay the credit bureaus to use that information to check your credit. They run a credit check, for example, before they decide whether to lend you money, give you a credit card, or rent you an apartment.

You have the right to get a free copy of your credit report every year from the three major credit bureaus. Some financial advisors suggest staggering your requests over a 12-month period to help keep an eye on your reports and make sure they have accurate information. The best way to get your free credit report is to go to AnnualCreditReport.com.

A credit score is a number calculated based on the information in your credit report. It helps predict how likely you are to repay a loan and make the payments when they are due. Usually, credit scores fall between 300 and 850. A higher score means that you have “good” credit. In this case, businesses believe you are less of a risk, which means you are more likely to get credit or insurance---or pay less for it. A low score means you have “bad” credit, which means it will be harder for you to get a loan or a credit card---and you are more likely to pay higher interest rates on credit you do get.

Because your credit report affects your ability to get loans, apartments and more, you want to make sure everything in it is correct, and that no one has been misusing your personal information. You can take care of credit monitoring in several ways:

  1. Monitor your credit report yourself for free. Request your free credit report and review it to make sure there are no problems or mistakes.
  2. Accept free credit monitoring offered to you due to a data breach. If your information was exposed by a data breach, many companies offer you free credit monitoring.
  3. Pay for a credit monitoring service. These services usually charge a monthly or annual fee.

In the fall of each year, financial institutions throughout the United States support Get Smart About Credit, a national campaign---established by the American Bankers Association Foundation---that provides resources to educate teens and young adults about the importance of using credit wisely, paying for college, managing your money, and protecting your identity. This campaign recognizes the need to raise awareness about the importance of personal financial skills for a secure financial future.

Knowing about the potential impacts and basics related to your credit, you can get smart about credit, too!

Angela Boswell
Community Banking Manager, New Oxford Office