Credit is more than just a number - it’s a powerful tool that shapes your financial future. In this month’s Real Secrets of Money™ session, we broke down the basics of credit and explored practical strategies to improve it. By understanding how credit works, you can make smarter choices and avoid costly mistakes.

What Is Credit?

At its core, credit is the ability to borrow money or access goods and services with the agreement that you’ll pay later. There are three main types:

• Revolving Credit – Credit cards fall into this category. They have a set limit, require at least a minimum monthly payment, and can be reused as you pay down the balance.

Tip: Use credit cards strategically for everyday purchases you can pay off monthly. This helps build history without piling up debt.

• Installment Credit – Mortgages, car loans, and student loans are common examples. These come with fixed payments and a set payoff timeline.

Tip: Automate payments for loans so you never miss due dates, protecting your payment history.

• Open Credit – Utility bills or cell phone plans. These aren’t always reported unless they go unpaid and move to collections.

Tip: Pay utilities on time—late payments could hurt your credit if they’re sent to collections.

Credit Report vs. Credit Score

Think of your credit report as your financial story and your credit score as the headline.

• Your credit report tracks past loans, account activity, and payment history.

Tip: Review your free report annually at AnnualCreditReport.com to check for errors or fraudulent activity.

• Your credit score is the three-digit number (300–850) lenders use to assess your reliability.

Tip: Many banks and credit card companies now offer free score tracking—use these tools to monitor progress over time.

Understanding the Credit Bureaus

There are three major credit bureaus in the United States: Equifax, Experian, and TransUnion. These organizations are responsible for collecting and maintaining information about your credit history. While each bureau may have slightly different data, they all track key details such as payment history, account balances, credit inquiries, and public records. It’s important to regularly review your reports from all three bureaus, as lenders don’t always report to each one equally. If an error appears on one report but not the others, you must dispute it directly with that specific bureau. You can request a free credit report from each bureau once a year at AnnualCreditReport.com, or you can access each bureau by clicking here Equifax, Experian, and TransUnion

What Makes Up a Credit Score?

Here’s how most scoring models weigh your activity:

• Payment History (35%) – Pay on time, every time.

Tip: Set up autopay or reminders on your phone. Even one late payment can significantly impact your score.

• Credit Utilization (30%) – Keep balances below 30% of your total available credit. Under 10% is even better.

Tip: If you’re carrying a balance, pay it down mid-cycle, not just at the end, so lower usage shows on your report.

• Length of Credit History (15%) – The longer your accounts are open, the better.

Tip: Don’t close old cards, even if you rarely use them.

• Credit Mix (10%) – A healthy mix (credit cards, mortgage, auto loan, etc.) shows lenders you can handle different types.

Tip: If you only have one kind of credit, consider diversifying gradually and responsibly.

• New Credit Inquiries (10%) – Too many applications in a short time can lower your score.

Tip: Shop for loans (like a mortgage) within a 14–30 day window so inquiries count as one.

FICO vs. VantageScore

• FICO is the most widely used model, relied on by banks, auto lenders, and mortgage companies.

• VantageScore is gaining traction with newer lenders and tends to be more forgiving for those with limited history.

Tip: Check which model your lender uses before applying. Scores may vary between the two, so don’t panic if the numbers aren’t identical.

Tips to Improve Your Credit

Here are some simple, actionable steps:

• Pay at least the minimum balance on time—set autopay whenever possible.

• Keep utilization low—aim for 10–30% of your credit limit.

• Don’t close old accounts; use them occasionally to keep them active.

• Request a credit limit increase (without raising your spending).

• Use tools like Experian Boost to add rent or utility payments.

• Consider a secured credit card if you’re building or rebuilding credit.

• Ask a trusted family member to add you as an authorized user on their account.

• Dispute errors directly with each bureau (Experian, Equifax, TransUnion).

Myths Debunked

• Closing old cards improves your score — False. It can shorten your credit history.

• Checking your own credit hurts your score — False. Only hard inquiries affect it.

• Carrying a balance helps — False. Pay in full if you can; carrying debt just costs interest.

• Paying on time is all that matters — Partially true. Utilization, history, and mix matter, too.

• Opening new cards always helps — Depends on your current profile.

• Debit card use affects credit — False. Debit doesn’t report to credit bureaus.

Credit Freezing for Protection

A credit freeze is like locking your financial front door. It prevents unauthorized hard inquiries, protecting you from identity theft.

Tips for using a credit freeze:

• Freeze your credit with all three bureaus (Experian, Equifax, TransUnion).

• It’s free and reversible—you can lift it temporarily with a PIN when applying for new credit.

• Keep your PIN secure. Without it, even you can’t “unlock” your credit.

Audience Goals and Final Thoughts

During the session, participants shared common goals: reducing debt, buying a home or car, raising their credit score, and guarding against fraud.

We encouraged everyone to take ownership of their credit journey. Whether you’re starting fresh or rebuilding after a setback, the key is consistency. Small changes—like automating payments or keeping balances low—add up to long-term success.

Want Help?

If you’d like personalized help understanding or improving your credit or if you’re curious about how you can help others as we do—schedule a free consultation with the person who invited you to the session.

“Credit isn’t just about numbers. It’s about choices, freedom, and your financial future.”

Replay available: Watch Here

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