5 Things You Should Know About Credit

by Julia Guardione Updated on: May 23, 2019

Your credit report and your credit score are not the same

While your credit score is calculated by the information on your credit report, these two things are different. Your credit report is made up of all inquiries, account history, debt accounts, public records, and much more information. The score may determine the interest rate you are offered on an offer of credit, but many times, the credit history on your report will decide if you are approved or declined for credit.

Credit reports help you stop fraud

Viewing your free credit reports once a year, as suggested by the federal government, can help to spot and stop fraud. If someone has stolen your identity, there will likely be credit inquiries and/or accounts that you are not aware of. You should contact the credit bureaus immediately and start the process of regaining your identity.

Your credit score is based on 5 areas

There are 5 core areas that make up a credit score. They are credit inquiries, credit utilization, average credit age, payment history, and account mix.

Credit inquiries refers to companies reviewing your credit report after you have submitted an application. These inquiries stay on your credit report for two years; however, only the previous 12 months will have an effect on your credit score.

Credit utilization accounts for a large percentage of your credit score because it is based on the amount you currently owe your creditors. Installment loans such as, mortgage, car notes, etc. are included in this number; however, revolving credit, such as credit cards, has the biggest impact on this score.

Credit age measures how long you have had a credit history and how long your accounts have been open. The longer you have had credit, the better this score will be. This is why it’s important to not close old accounts if not needed.

Payment history has the largest impact on  your score because it is what tells a creditor that you will make the necessary payments to them in a timely fashion. It is very important to pay your accounts on time to prevent losing excessive points for late or derogatory payments.

Account mix is the mixture of different account types on your credit report. Having a mix of accounts including credit cards, auto loans, mortgage loans, etc. will help to improve this section.

Your credit score influences your interest rates

If you are in the market for a new home or car purchase, your credit score will impact the amount you are paying. Interest rates are generally decided based on your credit score; the higher the score, the lower the interest rates. Be sure to shop around for the best rates before buying a new home or car.

Joint accounts affects your credit the same as individual accounts

Contrary to popular belief, if you co-sign a loan with someone, you are held equally liable for repayment of the loan. Therefore, if the loan defaults, your credit score will be impacted.

Tell us something you’ve learned about your credit score!

Related Posts

About The Author


Julia Guardione

Julia Guardione is RateGenius’ auto refinance expert. She is a graduate of Texas State University and a lover of all things outdoors. She lives in Austin, Texas with her dog and cat. She’s always open to new ideas, so if you have any suggestions or questions, email her at pr@rategenius.com.


Read More

by Stephanie Colestock

What You Need To Know About the New Experian Boost

Improving your credit score usually takes years’ worth of effort. With Experian Boost, you can increase your score in seconds. By the time you reach adulthood, you already know that your credit score is very important. Even if you don’t know exactly how those three-digit numbers will…

by Stephanie Colestock

When Should I Refinance My Car Loan?

Were you happy with your car loan when you got it? Not many are, so you might consider refinancing. ● When considering a refinance, sooner is usually better than later. ● One of the best times to refinance is when interest rates are down. ● Take action…

by Chonce Maddox

Not all Credit Scores are Created Equal — Just Look at UltraFICO

Did you know you have more than one credit score? Which one is the best or the right one? Your score matters. Your credit score is one of the most important numbers influencing your financial health. For lenders, it is a major factor for determining your trustworthiness as a…

review review

Customer Reviews

Read our 11192 Certified Reviews

4.9

READ OUR REVIEWS
apply now apply now

Apply Now

Lower your interest rate and drop monthly payments by an average of $76*/month!


GET STARTED