Educational Guide

Understanding your credit, in plain language

This guide is for education only and is not legal advice. Knowing how credit works helps you make confident decisions.

Credit report vs. credit score

Your credit report is a detailed record kept by Equifax, Experian and TransUnion: your accounts, balances, payment history and inquiries. Your credit score is a single number calculated from the information in that report. Fix the report, and the score can follow.

The five FICO factors

FICO scores weigh five areas of your credit report.

• Payment history

  35%

  Whether you pay on time. Late payments and collections weigh heavily.

• Amounts owed

  30%

  How much of your available credit you use (utilization) and your total balances.

• Length of history

  15%

  How long your accounts have been open and their average age.

• New credit

  10%

  Recent applications and newly opened accounts.

• Credit mix

  10%

  The variety of accounts you manage, such as cards and installment loans.

Why utilization depends on the statement closing date

Card issuers typically report your balance to the bureaus around your statement closing date, not your payment due date. So even if you pay in full every month, a high balance on the closing date is what gets reported. Paying down the balance before the statement closes can lower the utilization that appears on your report.

How a lawful FCRA dispute works

1. Under the Fair Credit Reporting Act, you can dispute information that is inaccurate, incomplete or unverifiable.
2. You send the dispute to the credit bureau. The bureau must reinvestigate, generally within 30 days.
3. The company that supplied the information (the furnisher) must report accurately and review what the bureau sends.
4. If the item cannot be verified or is wrong, it must be corrected or removed. You receive the results in writing.

You always have the right to file disputes yourself, for free.