Beginner’s Guide to Credit

What is Credit?

Credit is a report card of your trustworthiness with money. It shows how responsible you are at borrowing what you can pay back and paying back on time. It may seem like one of those things you can live without when you’re first starting. Still, as your financial goals grow and change, you’ll need a credit score for lenders to approve your large purchases, such as a car, house, and potentially lower interest rates on loans. Establishing that history of being responsible with a revolving line of credit now is crucial.

How do I find out my credit history?

Once a year, you can obtain your credit report for free from

This website is the only official site to receive your credit report free from one or all three credit reporting bureaus (Experian, TransUnion, Equifax). Credit scores are not included in your credit report, but are available for a nominal fee.

What’s a FICO Score?

Fico Stands for Fair Issac Corporation, a company whose software calculates credit scores for all bureaus. Each bureau has a different way of calculating scores, and the weight of the various factors can fluctuate based on the criteria being used.

How do I build a credit score?

A lack of established credit history is a common reason for not having a credit score. One simple tactic that may help build credit history is to be an authorized user on credit cards.  It’s important to note that if the primary account holder doesn’t manage the account responsibly, it could negatively impact you as the authorized user. Another option is to take out a secured credit card or a share secured loan to establish positive borrowing history with responsible repayment.

What makes up a credit score?

Your credit score comprises several factors that each credit bureau weighs a little differently. On average, the credit is composed of the following:

Carolinas Telco Credit Score Clip Art

Payment History————————————————-35%

Credit Utilization————————————————- 30%

Length of Credit History—————————————- 15%

Credit Mix ———————————————————10%

New Credit ——————————————————–10%



Payment History

is the most significant factor in calculating your credit score because it shows your repayment likelihood. Timely payments are one of the most important things you can do for your credit; keep in mind that late payments of 30 days or more can cost someone up to 110 points off their score.

Credit Utilization

is the percentage of your total spending limit that you’re using; the lower this percentage is, the better. The rule of thumb is to keep this rate under 30% to avoid lowering your overall credit score.

Length of Credit History

comprises three factors:

    1. The average age of all your accounts
    2. How long it has been since an account has been used
    3. The ages of your oldest and newest accounts

Credit mix

is the variety of Installment and Revolving Credit. Installment loans are repaid with regularly scheduled payments, such as Mortgages or Personal Loans. Revolving credit is a line of credit with a preapproved credit limit and no installment repayment plan, such as credit cards or Home Equity Lines of Credit (HELOCs).

New Credit

includes the number of inquiries made into your credit in a short period. Typically, the greater the number of hard inquiries, the greater the penalty.

Have any more questions about credit?

We’re here to help! Contact us today to learn more about credit and check out our financial education page for interactive financial tools.


Scroll to Top