Credit, in plain language

Credit reports

A credit report is your borrowing history on paper: your accounts, balances, payment record, and public records, compiled by the three major bureaus — Equifax, Experian, and TransUnion. Lenders read it to decide whether to say yes. You are entitled to review your reports regularly, and you should: knowing what they say is the starting point for everything else.

Credit scores

A credit score condenses your report into a number. The biggest factors: whether you pay on time, how much of your available credit you use, how long your accounts have been open, the mix of account types, and how recently you have applied for new credit. Different scoring models weigh these differently, which is why your number varies from place to place.

Credit utilization

Utilization is the share of your available credit you are actually using. A card with a $1,000 limit carrying a $900 balance sits at 90% — and using that much of a limit reads as risk to a lender, even when you pay on time. Keeping balances low relative to limits is one of the most direct habits you control.

Payment history

Payment history carries more weight than any other factor. One habit — every account paid on time, every month — does more for your credit over time than any trick or shortcut ever will.

Credit mix and new credit

Lenders like to see you manage different kinds of credit responsibly — revolving accounts like cards, and installment accounts like loans. Where the foundation is thin, a secured product can be an appropriate way to add positive history. New applications, though, add inquiries: apply with purpose, not on impulse.

Common credit mistakes

• Closing your oldest card and shortening your credit history
• Maxing out limits, even when the balance gets paid
• Ignoring your reports until a lender says no
• Applying for several accounts in a short window
• Paying for promises no company can honestly make — guaranteed scores, guaranteed deletions