Credit basics

A credit report is a detailed record of how you’ve used credit over time. It includes your open and closed accounts, your payment history, your balances, and any public records like bankruptcies or collections. Three major credit bureaus — Equifax, Experian, and TransUnion — each maintain their own version of your report, and the information can differ between them.

A credit score is a number that summarizes the information in your report. Lenders use it to quickly gauge how likely you are to repay a loan. The most widely used model is the FICO® Score, which ranges from 300 to 850. Higher scores generally mean better terms when you apply for credit.

Because each bureau may have slightly different data, your score can vary depending on which report is used to calculate it.

According to myFICO, five categories determine your FICO® Score. The approximate weight of each is:

• Payment history (about 35%) — Whether you’ve paid your accounts on time is the single biggest factor.
• Amounts owed (about 30%) — How much of your available credit you’re using, often called your utilization ratio.
• Length of credit history (about 15%) — How long your accounts have been open and how recently they’ve been used.
• Credit mix (about 10%) — The variety of account types you carry, such as credit cards, installment loans, and mortgages.
• New credit (about 10%) — How many accounts you’ve recently opened and how many hard inquiries appear on your report.

These weights are general guidelines, not exact formulas. Your individual score may weigh factors differently depending on the information in your report.

When someone adds you as an authorized user on their credit card, that account’s history may appear on your credit report. If the account has a long payment history and low utilization, it could have a positive effect on your credit profile.

However, there are important limitations to understand. Not all lenders report authorized-user accounts to all three bureaus. Scoring models may treat authorized-user accounts differently from accounts you opened yourself. And some lenders, when evaluating a loan application, may disregard authorized-user accounts entirely.

An authorized-user tradeline is not a substitute for building your own credit history. It can be one part of a broader strategy, but it works best alongside your own accounts and responsible credit habits.

There is no single trick that raises a credit score overnight. Meaningful improvement comes from consistent habits across the factors that scoring models weigh most. Here are strategies supported by the bureaus and consumer-finance regulators.

The most reliable way to build credit is to open accounts in your own name and manage them responsibly over time. Here are some options:

• Secured credit cards — You place a refundable deposit that becomes your credit limit. Use the card for small purchases and pay the balance in full each month. Many issuers report to all three bureaus.
• Credit-builder loans — Some banks and credit unions offer small loans where the money is held in a savings account while you make payments. Once the loan is paid off, you receive the funds. Your on-time payments are reported to the bureaus.
• Rent and utility reporting — Some services let you report your rent and utility payments to the credit bureaus. This can help establish a payment history if you don’t have traditional credit accounts.
• Paying on time, every time — Since payment history carries the most weight, consistently paying at least the minimum on every account is one of the most important things you can do.
• Keeping balances low — Try to use a small percentage of your available credit. Lower utilization generally helps your score.

Federal law gives you the right to see what’s in your credit report and to dispute anything that’s inaccurate.

• Free credit reports — You can request a free copy of your report from each of the three bureaus every week through AnnualCreditReport.com, the only federally authorized source.
• Disputing errors — If you find incorrect information on your report, you can file a dispute directly with the bureau. Under the Fair Credit Reporting Act, the bureau must investigate and respond, usually within 30 days.
• Credit freezes — You can freeze your credit for free at each bureau, which prevents new accounts from being opened in your name. You can lift the freeze temporarily when you need to apply for credit.

Checking your own credit report does not affect your score. It’s considered a “soft inquiry” and has no impact.