Credit scores and credit reports
I got turned down for a phone contract and had no idea why. Turns out I’d missed two payments on a store card I’d forgotten about.
When you apply to borrow, lenders want to know one thing: will you pay it back? To find out, they look at your history.
- Your credit report is a record of how you’ve handled credit: your accounts, balances, and whether you paid on time.
- Your credit score is a number calculated from that report. The higher it is, the less risky you look to lenders.
A good credit history can mean easier approvals and lower interest rates. It can also matter for renting a home, phone contracts and some jobs.
What affects your score
The details vary by country and by credit bureau, but the main things are similar everywhere:
- Paying on time. The single most important habit. Late and missed payments hurt the most.
- How much of your credit you use. Using a small part of your limit looks better than maxing it out.
- How long you’ve had credit. A longer history helps.
- Lots of applications in a short time. These can make you look desperate for credit.
- Serious problems, like defaults or court judgments, which stay on your report for years.
How to build good credit
- Pay every bill on time. Set up automatic payments for at least the minimum, then pay extra by hand.
- Keep balances low compared to your limits.
- Don’t apply for lots of credit at once.
- Check your report at least once a year, and fix any mistakes.
Checking your own report doesn’t hurt your score.
