Menu

FAQ: Credit Basics

See CreditRepair.com’s editorial content disclosure.

Whether you’re new to credit or you just want to make sure you understand it fully, you’ve come to the right place. Here, we’re covering all the credit basics to give you a solid foundation for moving forward. Let’s jump right in.

What Is Credit?

Credit is when you receive money, a good or a service, and you agree to pay for it in the future—usually with added interest. Nowadays, we use credit to buy lots of things, such as houses, cars, furniture and other big-ticket items. With a credit card, you can buy smaller items too, from food and clothing to those as-seen-on-TV gadgets you’re always curious about.

If you use it responsibly, credit can be a useful tool that helps you get things and go places. But if you don’t, you’ll have to face some negative consequences that will make your life harder. That’s why we recommend you understand how credit works before you jump in headfirst.

What Is a Credit Score?

Your credit score is a 3-digit number, typically on a scale of 300 to 850, that suggests how creditworthy you are—meaning, how good you are with credit and how much you can be trusted to pay back what you borrow. Potential lenders (or retailers, or landlords) will use this number to decide what kinds of credit cards and loans to offer you. Generally, the higher the score, the better the offers.

There are a few different types of scores, but the two best-known are your FICO score and your VantageScore. They’re calculated based on the information that shows up on your credit report.

What Is a Credit Report?

A credit report is essentially a record of your five credit factors: payment history, credit utilization, credit length, account diversity and new credit. It also shows things like your name and address and public records.

When you apply for something like, say, a mortgage, the lender will pull your credit report. They will then use one of the scoring models, like FICO, to determine your score based on the five factors.

It’s important for you to regularly check your reports with the credit bureaus because you should know what pieces of information (or “items”) are influencing your score. Are there any inaccurate items? Are there debts you haven’t addressed? Do you need a more diverse credit mix? You should ask these questions and more when checking your credit report.

What Are the Three Credit Bureaus?

The three main credit bureaus are Equifax, Experian and TransUnion. When lenders want to see your credit report, they will request it from one or more of these reporting agencies.

Your report and score can differ from bureau to bureau because they don’t always have the same information, so we recommend you check each report separately to confirm that everything is on the up-and-up. If your Experian report looks good but a certain creditor only uses TransUnion reports, you should know what your TransUnion report looks like too.

What Are Good and Bad Credit Scores?

Generally, “good” scores are anything above 670, and “bad” scores are anything below 670. But let’s be more specific:

  • Excellent: 800 – 850
  • Very good: 740 – 799
  • Good: 670 – 739
  • Fair: 580 – 669
  • Poor: 300 – 579

If you have a score that’s considered “good” or better, great! Good scores mean better chances of being approved for credit, lower interest rates and higher credit limits, so keep it up. Just remember that there’s a world of difference between a good score and a very good or even excellent score, so you likely still have room for improvement.

On the other hand, if you have a score that’s fair or poor, you may have a harder time getting approved for loans and apartments, and you’ll likely spend more money on interest, security deposits and insurance premiums. Luckily, even a small boost to your score can make your financial situation better and give you more credit options. It will take some dedication and hard work, but you can repair your credit over time.

What Actions Help My Credit?

You might not see results immediately, but there are a lot of things you can do to help your credit, slowly but surely. Here’s a list to get started:

  • Pay your bills on time as much as you can.
  • Pay down your debt and keep balances low to reduce your utilization ratio.
  • Get questionable, inaccurate items removed from your reports (we can help!).
  • Open a variety of credit accounts, including things like auto loans and credit cards.
  • Apply for new credit only when you need it to avoid having too many hard inquiries.

What Actions Hurt My Credit?

We’ve all been there—sometimes life happens and you can’t avoid damaging your credit. Your credit can be brought down a lot faster than it can be brought up, though, so it might help to review these things that can hurt your credit:

  • Not paying bills on time
  • Filing for bankruptcy or foreclosure
  • Applying for too many credit accounts
  • Carrying high balances on your credit cards
  • Ignoring questionable negative items on your report

If you’re feeling unsure about how you can work to improve your score, our team of advisors are ready to help you and answer your questions. Just visit CreditRepair.com today to get started.


Reviewed by Laura Tanner, Assistant General Counsel for CreditRepair.com. Written by CreditRepair.com.

Born on an US Army base in Nuremburg, Germany, Laura Tanner earned her BA in English with a French minor from the University of Utah.  After graduating, Laura worked as an environmental consultant in Portland, Oregon and Salt Lake City, Utah for many years before going back to school to  earn her Juris Doctor from the SJ Quinney College Law at the University of Utah. Laura has worked on the Progrexion legal team since 2015, and manages the litigation, among other things.  Before joining the Progrexion family of companies, Laura worked at a boutique litigation firm in Salt Lake City.  Laura Is admitted to practice law in state and federal court in Utah.

Note: Articles have only been reviewed by the indicated reviewer, not written by them. The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Posted in Credit 101
Learn how it works

Questions about credit repair?

Chat with an expert: 1-800-255-0263

Facebook Twitter LinkedIn
Have a question?
Call us for a Free Credit Check
from a Credit Expert
1-855-255-0263
Top