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Understanding Credit

More than 25 factors help determine your credit score, including five which generally fall in this order of relative importance:

  • Your payment history and whether you make payments on time

  • How much you owe

  • How long you have had credit

  • Any new credit you have requested

  • Types of credit (loans, credit cards, etc.)


If you have already identified a need to improve your credit score, there aren’t any quick fixes but you can slowly work toward your goals of a higher credit score by doing some of these:

  • Reduce your credit card balance

  • Reduce the number of credit cards you have (particularly if they have small balances)

  • Make payments on time

You can get a free copy of your credit report every 12 months from each national consumer credit reporting agency (Equifax, Experian and TransUnion). Make sure you use these free reports to confirm the information is accurate and there isn’t suspicious activity that could be a sign of identity theft. Your credit history can impact your ability to obtain favorable mortgage rates, credit card approvals and even jobs.

Here’s how to request your credit reports and what you should do to ensure the information is accurate:

  • Request your free credit reports at www.annualcreditreport.com

  • Evaluate your debt regularly to determine how you can reduce or eliminate any obligations you may have

  • Examine whether your borrowing and payment activities are negatively impacting your credit score (how much credit, how often you pay and how much you owe can all contribute)

If you are currently past due, or delinquent, on your student loan, it may be reported to the three major national consumer credit reporting agencies. Student loan servicers report all delinquencies of at least 90 days to the credit agencies. Late payments stay on your credit report for seven years, so it is critical that you work with your student loan servicer. If you are experiencing any difficulty making a payment, contact MOHELA to discuss alternative options.

Each national consumer credit reporting agency’s report may vary slightly. Fair Isaac’s FICO score is one of the most commonly used credit scoring calculations. Based on the information in your credit report, each credit reporting agency will assign you a FICO credit score ranging between 300 (extremely high risk) and 850 (extremely low risk). Your credit score helps indicate to potential lenders how likely you will be to pay back the loan according to set terms. Not only can the score affect your ability to receive credit at a reasonable interest rate, it can also impact whether or not you get a nice apartment or job.

Personal Information

  • Name

  • Current and recent addresses

  • Social Security Number

  • Date of birth

  • Current and previous places of employment

Credit History

  • Credit accounts, amount of the loan or credit limit, payment terms, balance and history of payments

Credit Report Inquiries

  • All inquiries from lenders, service providers, landlord or insurer from the past two years

Public Records

  • Bankruptcy can stay on a credit report between 7 and 10 years, depending on the type of bankruptcy filed.