A Practical Guide to Credit: Personal Finance Series (Part 4)

by | Nov 21, 2025 | 2025, Family and Consumer Sciences, Money Management

When people talk about credit, they are referring to their credit history. Credit history describes how they have used money over time, which can significantly impact many aspects of life, including housing, employment, and finances, because landlords, lenders, insurance companies, and potential employers often review it when making decisions.

Three nationwide credit bureaus—TransUnion, Equifax, and Experian—collect credit history and additional information about individuals, such as names, addresses, Social Security numbers, credit cards, loans, and outstanding debts.

Credit Reports

report credit score banking borrowing application risk form

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Credit bureaus provide credit reports to businesses that pay for this information to assess your reliability before working with you, like renting you an apartment or giving you a credit card. Whether your credit is considered “good” or “bad” depends on your history. People who pay bills on time and don’t borrow more than they can repay tend to have good credit, while those with late payments or debts they can’t afford may develop bad credit.

Each bureau gathers data from different sources, so your credit reports may vary slightly between them. Nonetheless, all three bureaus strive to keep their information accurate, but mistakes do happen, and checking your credit report for errors is important because inaccuracies can affect your opportunities. Accessing your credit report can also help spot signs of identity theft. You can order a free annual credit report from a centralized provider. To order your report, these are your options:

If you find errors in your report, you have the right to dispute them and seek corrections.

Credit Scores

A credit score is a number, usually between 300 and 850, that helps predict the likelihood and timeliness of loan repayment and other payments. Lenders, landlords, and other businesses use your credit score to decide whether to offer you credit and what terms, such as interest rates, you’ll receive.

In general, a higher score shows you have “good” credit, making you a lower financial risk, while a lower score signals “bad” credit, which can make it harder to get approved or result in higher interest rates. Credit scores are grouped into five ranges: poor (300–579), fair (580–669), good (670–739), very good (740–799), and exceptional (800–850). About 71% of Americans have a good FICO score or better. You can improve your credit score over time with consistent effort; it’s entirely possible.

Credit scoring systems are calculated in different ways. Most lenders use the Fair Isaac Corporation (FICO) score, which is based on five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

Credit Tools & Resources

Unlike credit reports, you usually have to pay to see your official credit score, although some mobile apps now offer it for free.

  • Experian offers a free FICO 8 credit score, credit report, credit monitoring alerts, dark web surveillance, and a privacy scan, with additional features available on paid plans.
  • Credit Karma provides free daily credit reports and VantageScores from Equifax and TransUnion, credit analysis and tips, and basic identity monitoring.
  • Credit Sesame gives free daily VantageScore updates from TransUnion, insights into key credit factors, and a score simulator, with more features on paid plans.

Furthermore, some financial institutions also let you see your score; always verify whether any credit monitoring fees apply.

Additional Resources

Getting a Credit Card (FTC)

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Suzanne Holloway
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