Credit Report & Score Basics

What is Credit? Why is it Important?

Credit is the ability to borrow money. Credit can help you buy an item or service using money you borrowed from a creditor (like a bank) that lends you the money. You then pay back the money you borrowed (usually with interest–the extra costs you pay for getting to use someone else’s money) by a deadline date or over a period of time. Credit is important because it can help you buy items you need or want, such as homes and cars, without having all the money up front right away.

A creditor, or lender, is a person or business, like a bank, that has loaned you money. Creditors decide whether to loan money to you based on their belief that you will pay the money back. In the United States, creditors use your credit report and score to decide if they will offer you a loan. This module provides information on credit, and how credit can affect your finances.

Credit cards on a laptop keyboard

This module takes about 30 minutes to complete. By the end of this module, you will know…

  • …what impacts your credit report and how to check your credit report.
  • …what determines your credit score.
  • …ways to build and improve your credit.

Complete the following pre-learning check to test your knowledge. Answer “true or false” to the three statements below. Click on the blue box to find the correct answer.

Checking your credit report or score lowers your credit score.

False, checking your own credit report or score has no effect on your credit score. One thing that can affect your credit score are so called “hard inquiries” that happen, for example, when you apply for new credit. Most banks and credit unions offer a free service to check your credit score. It is a good idea to check your credit score from time to time to know how your credit score moves up or down.

Your income, age, or marital status do not affect your credit score.

True, your income, age, or marital status do not affect your credit score. People of all income levels can have higher or lower credit scores. Your credit score is based on your access to and use of credit.

You cannot get a credit card if you don't have a credit score yet or your credit score is low.

False, even if you don’t qualify for a traditional credit card, you can apply for a secured credit card. You need to pay a deposit to get a secured credit card, but you can get a secured credit card even if your credit score is low or if you don’t have a credit score yet. Using a secured credit card will help you build up your credit score.

What is a Credit Report?

Your credit history is listed on your credit report. In the United States, three credit bureaus (Experian, TransUnion, and Equifax) keep a credit report for you. Creditors, such as credit card companies, report your borrowing and repayment information to these credit bureaus. This information is then included on your credit report. Examples of information on your credit report include:

  • The number of loans you have taken and how much money you have borrowed
  • Your repayment history including the number of on-time, missed, and late payments
  • Financial events such as repossessions, foreclosures, and bankruptcies

How long do events stay on my credit report?

Positive events such as on-time payments, and accounts or loans that have been paid in full and are closed stay in your record forever. 

Negative events such as charge-offs and late payments can stay on your credit report for up to 7 years. Bankruptcies will continue to show up for 10 years.

Here’s how it works…

Let’s learn more…

How Can I Check My Credit Report?

You should check your credit report from each credit bureau at least once per year. You can request your free credit reports through this website: Since October 2023, this service has been made available to check your credit report as often as once a week for free. If possible, check your credit report from a secure location such as your home computer or through your financial institution. It is not recommended to use a public wireless network (such as a public library wifi), because your personal information is not protected. If you’re not comfortable requesting your report online, you can request your report by phone or mail also.

Here’s what to expect when requesting your credit report online:

  • This process will give you your credit report, not your credit score.
  • It takes about 10-20 minutes to go through the steps to request your credit report.
  • Be prepared to provide your social security number or individual taxpayer identification number (ITIN) and other information about yourself.
    • You cannot use your ITIN to request a credit report online on, but you can use your ITIN if you request a credit report by mail. Learn more here: Building Credit as an Immigrant
  • You’ll be asked to choose one of three credit bureaus (Experian, Transunion, or Equifax) and will then be linked directly to their site.  You can request one report, or all three at the same time.
  • You will see advertising for other paid services, but you can ignore this. There is no cost for requesting your free annual credit report.
  • You can save and print your credit report.
  • Sometimes, for a variety of reasons, you may not be able to get one of your three credit reports online. For example, if you don’t get the answers 100% correct on the identity questions (this is common), you might be told you cannot get a report online that day. If this happens and you can’t request your report online, don’t worry. Simply choose a report from one of the other two bureaus or follow the directions below to request your report by phone or mail.

To request a free annual credit report by phone: Call 1(877) 322-8228

To request one by mail:
 Send a request form to

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Requests by mail may take 2-3 weeks for delivery

Reading your report and fixing errors

You can find instructions on how to dispute an error with the credit reporting agencies at the following links:

Equifax: Dispute Information on Your Equifax Credit Report 

Experian: Dispute Information on Your Experian Credit Report

TransUnion: Dispute Information on Your Transunion Credit Report

Watch this video for tips on fixing errors on your credit report:

What is A Credit Score?

Your credit report’s information is used to calculate your credit score, which ranges from 300 to 850. Creditors use your credit score to decide if they should offer you credit. This is known as your credit worthiness.

You will get a credit score, often called a FICO score (the most common type of credit score), when you have had a credit account open at least six months from a creditor that reports activity to credit bureaus. Banks and credit unions almost always report all activity to credit bureaus. Payday lenders and other alternative providers such as auto title lenders, pawn shops, check cashers, and money transfer services usually do not.

How is My Credit Score Calculated?

A pie chart that describes the below information on what credit score is made up of

Factors that influence your credit score are:

  • Payment history
    • Always do your best to make your payments on time and pay at least the minimum payment every time. Paying more if you can, rounding up or making extra payments through the month can help you pay off debt faster.
  • Credit usage–the amount you owe 
    • Keep your credit card balances low. You should aim to keep your balances at lower than 30 percent of the credit limit on each of your credit cards. For example, if your credit limit is $1,000, keep your balance below $300 to maintain an optimal credit score. You will also be charged interest whenever you leave a balance on your credit card for over a month, so it is best to always pay all credit card balances off in full so you will not be charged extra for your purchases.
  • Length of credit history
    • Keep old credit accounts open. Keep your old credit accounts, if possible, even if you are no longer using them, especially if you do not need to pay to keep them open. The old credit histories boost your credit score. Also, the higher your total credit limit is, the lower your credit utilization rate is, which means how much of your available credit you are using, so your credit score will improve due to that as well.
      • If you are keeping an older account open, make sure to keep it active so the financial institution does not cancel it due to inactivity. This might mean making a small purchase every 3-6 months.
  • New Credit
    • Do not apply for many credit accounts during a short period of time. Whenever you apply for credit, the creditors perform a “hard pull”, also called an inquiry, on your credit history. These hard pulls have a negative effect on your credit score. So, it is best to not apply for new credit any more often than once every six months if possible. The exception to this is if you are applying for mortgages or car loans. It is assumed that you will want to apply to several financial institutions to see who has the best offer. If all your applications for the same purpose (e.g., a mortgage loan) are in a 30-day period, they will count as one inquiry.
  • Credit Mix
    • This factor focuses on the different types of credit on your credit report, like mortgages, credit cards, student loans, and auto loans. Examples of types of credit include installment credit (ex: car loan that you pay each month until loan is paid off) and revolving credit (ex: credit that does not have a predetermined end date like credit cards). It is not necessary to have all different types of credit. However, a mix of these types may benefit your credit score.

How Do I Check My Credit Score?

Your credit score is not included with your credit report, but you may be able to check your credit score for free. A few options are to:

  • Check with your bank or credit union. Many financial institutions offer free credit scores to their customers.
  • Use a credit score service. There are many websites and services that offer free credit score checks. Beware of scam websites, make sure to search information about the website or company to make sure they are legitimate before you give them any of your information. Also, the score you get from these sites is only an estimate and may not be the same as the one you get from a lender.

How Can I Build Credit or Raise My Credit Score?

Raising your credit score can take time, but it is possible to get started quickly with simple steps.

Ways to build your credit include:

Secured Credit Cards

If you start building your credit score from scratch, you may need to start with a secured credit card. A secured credit card is exactly like a traditional credit card, except you need to make a cash deposit that the credit card company can draw from if you do not make your payments. The deposit amount varies but is typically between $200 and $500. You will get the deposit back when you close the account.

Otherwise, secured credit cards work like normal credit cards. You use it to buy things, you make payments on it, and you pay additional interest if you do not pay your balance in full every month. So, make sure to pay off your entire balance every month to avoid extra interest payments. Using a credit card helps build up your credit history and credit score. When your credit score goes up enough, you can switch from a secured credit card to a regular one, which may come with extra benefits like a cash back bonus. A cash back bonus means that the credit card company gives a little bit of money back to you from your purchases with the credit card. Usually the bonus is around one to two percent, or about a dollar or two for every hundred dollars you spend.

Have a Co-Signer or Become an Authorized User

You can get a loan or an unsecured credit card easier if you have a co-signer, such as a family member or a spouse, with a good credit history. However, you and the co-signer should keep in mind that the co-signer is fully responsible for the full amount owed if you fail to pay back your loan.

Another way to build credit with a close family member or a spouse with a good credit history is by becoming an authorized user on one of their credit cards. As an authorized user, that credit card’s activity is reported to credit bureaus and will affect your credit score positively, if payments are made on time and the balance is kept low. You do not even need to use the credit card for it to have an impact on your credit score. Keep in mind that there may be a negative impact on your credit history if the main user fails to make payments or keeps a high balance.

You can find more tips on how to build your credit and improve your credit in these videos:

Test your knowledge

Credit Report and Credit Score Quiz Take this 10-question quiz to review the basics and test your knowledge. You can take this quiz as many times as you want.

Certificate of Completion

If you’d like to certify that you’ve completed this module, be sure to contact a UW-Extension Financial Educator to find out about program requirements.