Credit allows you to borrow funds to help you make large purchases. Use it wisely to avoid extra costs.
Keeping your credit in tip-top shape is important for life’s exciting times. After all, your credit reputation normally plays a major role in buying a car, paying for a dream vacation, renting an apartment, or buying a house!
Learn about credit fundamentals and how to build a strong credit reputation to help you reach your financial goals.
Credit is the ability to borrow money now with the understanding that you will pay it back later.
Past credit habits determine your credit reputation. It’s information that potential lenders, landlords, and employers use to decide whether to offer you credit, approve a rental application, or offer employment. You can practice good habits to improve a poor reputation.
Your credit report is a summary of your credit behavior based on identifying information, current or past accounts, credit inquiries, and public records. Your credit report can help you build, track, maintain, and protect your credit reputation.
Your credit score summarizes your reputation as a borrower, sort of like a grade. There are different scoring models, but the FICO® score is most common. Credit behavior can increase or decrease your score, and it’s best to stay within a range of 670-800—the higher the better!
Build and improve credit reputation by following healthy credit habits:
- Create and follow a spending plan.
- Pay bills on time – don’t skip payments.
- Pay off your credit cards in full each month – if you have to carry a balance, keep it as low as possible.
- Don’t apply for credit you don’t need.
- Keep your information secure to reduce the risk of identity theft.
- Keep receipts and review monthly statements for accuracy.
The Servicemembers Civil Relief Act, the Military Lending Act, and the Fair Credit Reporting Act are three laws that protect military consumers.
Check your credit report consistently—at least once a year. Carefully review your monthly statements, debt, and identity information. Notify the reporting agency immediately of any errors or unauthorized charges.
If you are just getting started and have never used credit before, your goal in establishing a credit reputation is to build up a positive history, not accumulate debt. Here a few options to consider:
- Open a secured credit card or loan from your local bank or credit union.
- Become an authorized user on a loved one’s credit card.
- Set up a joint credit account with someone you trust.