{"id":358680,"date":"2020-07-31T09:47:57","date_gmt":"2020-07-31T15:47:57","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=358680"},"modified":"2022-01-20T19:51:09","modified_gmt":"2022-01-21T02:51:09","slug":"faq-credit-basics","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/credit-101\/faq-credit-basics\/","title":{"rendered":"FAQ: Credit Basics"},"content":{"rendered":"\n
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See CreditRepair.com\u2019s editorial content disclosure.<\/em><\/a><\/p>\n\n\n\n

Whether you\u2019re new to credit or you just want to make sure you understand it fully, you\u2019ve come to the right place. Here, we\u2019re covering all the credit basics to give you a solid foundation for moving forward. Let\u2019s jump right in.<\/p>\n\n\n\n

What Is Credit?<\/h2>\n\n\n\n

Credit is when you receive money, a good or a service, and you agree to pay for it in the future\u2014usually 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\u2019re always curious about.<\/p>\n\n\n\n

If you use it responsibly, credit can be a useful tool that helps you get things and go places. But if you don\u2019t, you\u2019ll have to face some negative consequences that will make your life harder. That\u2019s why we recommend you understand how credit works before you jump in headfirst.<\/p>\n\n\n\n

What Is a Credit Score?<\/h2>\n\n\n\n

Your credit score is a 3-digit number, typically on a scale of 300 to 850, that suggests how creditworthy you are\u2014meaning, 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.<\/p>\n\n\n\n

There are a few different types of scores, but the two best-known are your FICO score and your VantageScore. They\u2019re calculated based on the information that shows up on your credit report.<\/p>\n\n\n\n

What Is a Credit Report?<\/h2>\n\n\n\n

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.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

It\u2019s important for you to regularly check your reports<\/a> with the credit bureaus because you should know what pieces of information (or \u201citems\u201d) are influencing your score. Are there any inaccurate items? Are there debts you haven\u2019t addressed? Do you need a more diverse credit mix? You should ask these questions and more when checking your credit report.<\/p>\n\n\n\n

What Are the Three Credit Bureaus?<\/h2>\n\n\n\n

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.<\/p>\n\n\n\n

Your report and score can differ from bureau to bureau because they don\u2019t 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.<\/p>\n\n\n\n

What Are Good and Bad Credit Scores?<\/h2>\n\n\n\n

Generally, \u201cgood\u201d scores are anything above 670, and \u201cbad\u201d scores are anything below 670. But let\u2019s be more specific:<\/p>\n\n\n\n