In simple terms, credit is the ability to obtain goods or services prior to payment with the agreement to pay the money back later, usually with interest. There are different types too, such as credit given in the form of a card or in the form of a loan (like a mortgage!). Credit, and more specifically your credit score, determines your trustworthiness for banks and other financial institutions. As you’ll see, maintaining good credit is one of the most important aspects of your finances.  

Check out more credit facts and findings below to set yourself up for a smart and informed financial future.   

  1. There are multiple factors that make up a credit score. There are various credit score models that exist, but the FICO credit score has become the most widely used, and is “the global standard for measuring credit risk,” according to

 Here’s the breakdown of your FICO score: 

  • Payment history (35%): Self-explanatory, but it’s the biggest one. Do you pay your loans and credit card bills on time?
  • Amounts owed (30%): This all comes down to your credit utilization ratio, which is the outstanding balance on your card, divided by the card’s limit. You don’t want a high percentage. Instead, shoot for 30% of your limit.
  • Length of credit history (15%): Basically, the longer you’ve been using credit (wisely), the better.
  • Credit mix (10%): Variety is good, such as having a credit card and a monthly car loan.
  • New credit (10%): Don’t make it look like you NEED credit. Translation: Don’t open up multiple new accounts in a short amount of time. 
  1. Credit scores comes in ranges. Most credit scores fall between the range of 300 and 850, and the higher the score, the more beneficial for you. What category does your score fall under? 

Score Category

Score Range



Very Good







579 and lower

  1. Your credit reports detail your credit history. You actually have three different reports, each from these credit reporting agencies: Experian, Equifax, and TransUnion. On this report, you’ll see items like personal info, credit accounts, credit inquiries, and public record information. Lenders, insurers, employers, and even utility companies will, in most cases, assess your credit report to see how you manage your finances once you apply for their product or service. By law, you can pull your credit report once a year from each of the agencies at no charge. You can request yours here.   
  1. Credit reports aren’t always perfect. In fact, there have been over 158,000 complaints against the big three agencies since 2012, and 80% of them were due to errors on credit reports. Given that credit reports are so critical to your financial well-being, a smart strategy is to spread out your credit report requests throughout the year. This way, every four months you’ll be able to check your report for free and ensure accuracy. If you spot inaccuracies on your report, it’s up to you to contact either the agency you found the error in or the company that reported that information to the agency.
  1. Credit debt shouldn’t be taken lightly. Since this is credit 101 after all, it’s worth noting: Credit is not a cash substitute. The truth is, many people surrender to bad credit card habits leading them down a path where it could take months, even years, to restore your financial well-being. And considering 35% of your score is made up of your payment history, credit responsibility is paramount.
  1. You can improve your score, but it doesn’t happen overnight. First off, there’s a difference between looking for ways to boost a credit score that’s considered poor (lower than 580) and a good credit score (670-739) when you’re planning to buy something like a house or car. It takes time and financial dedication to improve your score, because there’s simply no quick-fix solution to boost it, say, 100 points. Evaluate your credit history, begin managing your current credit responsibly, and over time you’ll begin to see that number rise.

And if you’re starting from scratch and looking to build credit? Check out these tips on how to build credit fast from ground zero.

  1. Credit plays a big role in getting a home loan. No surprise, right? Due to the credit risk involved, mortgage programs have minimum credit scores that are considered acceptable. Having a low score can put you into specific mortgage programs or it can disqualify you from getting a mortgage altogether—but there is no “perfect” credit score needed to buy a home. Consider the FHA loan, which allows for a minimum credit score of 580.

It also affects the interest rate you can get. The lower the credit score, the higher the risk to the borrower, which means the higher the interest payment. On the flipside, a high credit score can give you a lower rate, potentially keeping thousands in your pocket over the life of a loan.

In most cases, if you’re score is 740 or above, you’d qualify for the best interest rate from most lenders.

Got visions of jumping on the homeownership bandwagon in the near future? Check out our first-time homebuyers guide to learn even more about credit, saving tips, loan options, and more!

Ditech is not a financial advisor and the ideas outlined above are for informational purposes only. They are not intended as investment or financial advice and should not be construed as such. Consult a financial advisor before making decisions regarding important personal financial matters, and consult a tax advisor regarding the deductibility of interest and tax implications.

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