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Credit Cards

Learn About Credit

What is a credit rating?

Understanding what's on your credit report is key to managing your credit rating. When you know where a credit score comes from and how it can affect you, you have the basic tools to better control your financial health.

Where your credit rating comes from

Every month, each of your lenders (your bank, finance company, department store or landlord, for example) reports your recent credit history to one or all three of the major credit bureaus—Experian, Equifax and TransUnion. The bureaus then compile and save these reports to determine your credit rating. Some credit rating information that may appear on your credit report includes:

  • Date each account was opened, current balances and credit limit
  • Whether you paid on time or missed payments
  • Whether your account has been turned over to a collection agency
  • Any judgments or tax liens
  • Any court judgments from small claims
  • Delinquent civil and child support payments
  • City, county, state and federal liens for unpaid taxes and bankruptcies.

How your credit rating affects you

When you apply for credit, a lender will consider both your credit rating and credit history to help assess the likelihood you will make your payments on time. Since a higher credit rating represents a lower risk to the lender, they are typically more likely to lend their money and offer lower interest rates to borrowers with higher credit scores.

Building and maintaining good credit

Your credit rating is most influenced by how timely your payments are and how much debt you have. The two most important things you can do to maintain a good credit rating are:

1. Pay at least the total minimum monthly payment by or before the payment due date every month. A history of on-time payments is one of the best things you can do for your credit.

2. Maintaining a high credit card balance may reflect a higher risk to lenders. You can increase your credit rating by maintaining a balance that is 20% or less of the overall credit card limit.

Staying informed about your credit

You are legally entitled to a free credit report every 12 months from one of the three major bureaus. Make sure to request a copy of your credit report at least once a year to stay informed about what your creditors are saying about you.