Credit Education
Before you can make good decisions about your credit, it helps to understand what's actually being measured. Here's a plain-language overview.
A credit report is a record of how you've managed credit over time — things like loans, credit cards, payment history, and public records such as bankruptcies. Lenders and other companies use it to get a general sense of your credit history.
Equifax, Experian, and TransUnion are the three nationwide consumer reporting agencies. Each maintains its own file on you, so the information on one report doesn't always exactly match the others.
Payment history — whether accounts were paid on time — is typically one of the most heavily weighted factors in credit scoring. Late or missed payments can affect your credit for years.
Utilization compares how much of your available revolving credit (like credit cards) you're using at a given time. Generally, using a smaller percentage of your available credit is viewed more favorably.
The age of your credit accounts — including your oldest account and the average age of all your accounts — is another factor considered in most scoring models.
When a lender checks your credit as part of an application, it's recorded as a "hard inquiry." Checking your own credit report yourself does not affect your credit the same way.
A collection or charge-off generally means an account went unpaid and was either sold to a collection agency or written off by the original creditor. These items can significantly affect a credit profile.
Consumers have the right to dispute information on their credit report that they believe is inaccurate or unverifiable. Disputes are reviewed by the credit reporting agency and the company that reported the information — accurate information generally cannot simply be removed on request.
Paying on time, keeping balances low relative to available credit, and only applying for new credit when needed are generally considered responsible, sustainable habits for building credit over time.
Two people with seemingly similar credit issues can see very different outcomes, because scoring and reporting depend on the full details of each individual's file — not just one factor in isolation.
Credit scores are calculated by scoring models based on the full contents of your file at a given moment — something no outside company controls. Any company promising a guaranteed score increase or guaranteed deletion is making a claim it cannot actually back up.
Schedule a consultation to discuss your goals and find out what next steps make sense for your situation.
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