10 Things You Need to Know About Credit

1. Your Credit Score. Know your credit score but also know what it means. The score is relative, but it is based on a point system where 850 is perfect, 720-749 is good, 660-719 is fair, and 659 and below means there is some repair to do.
   
2. Review your credit score once a year. There are several Web sites that will give you your credit score for free. You are eligible to receive your credit score and history once a year by law.
3. How to use it. Make sure you are using your accounts, but continually paying them down. When you use more than 70 percent of your credit account’s limit, this shows that you need the credit and can be interpreted negatively. When you use your credit often and pay it off, it shows lenders you are responsibly paying back your debts. 
4. What your score means to lenders. Whether or not a lender is going to give you a loan is based on your credit score and history; however, there’s no way of telling how the lender is going to interpret your score and history. They may use several different reports from different credit agencies, or they may base their decision on one alone. In some cases, some lenders have their own rules and qualifications for interpreting credit histories.
5. You have to build credit. No credit is sometimes just as bad as having bad credit. When you’re credit history has nothing on it, lenders have nothing to base their decision on. You’ll need to establish some sort of credit and begin building a responsible history. 
6. Different types of debt. There are two kinds of debt — secured and unsecured. Secured debt is loans you have for items that have collateral like cars, houses and property. If you were to default on your loan the issuer would want to collect the collateral to pay off the debt. Unsecured debt is when you used credit for intangible items like student loans or credit cards. 
7. Pay your bills on time. Roughly 35 percent of your credit score is based on payment history, so paying bills on time creates a strong history. Items such as overdue accounts, collection agencies, charge-offs or bankruptcies can damage your history.
8. Employers often check credit. Banks and lenders aren’t the only ones reviewing your credit history. Many employers will review your credit history as part of your background check when applying for a job. 
9. What to do with unused accounts. When a lender reviews your account they are going to look at account balances in relation to how much credit is available. Closing accounts you do not use removes those available balances from the equation and can actually lower a credit score. 
10. Check for errors on your credit history. Go through your credit report at least once a year and review each item line by line. Some credit report information could be wrong and it could negatively impact your ability to borrow money. Check for errors and if you find any, contact the credit bureau that supplied the information immediately.

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