Author name: Anna Williams

Going to grad school. Buying a home to call your own. Landing a dream job. These are major milestones that many of us have on our #lifegoals list, but they also have something else in common: You’d probably have a much easier time accomplishing them with good credit. After all, you’re more likely to nab a low-interest rate on private student loans, qualify for a mortgage or pass an employer’s background check if you have a history of responsibly managing your credit. Our point is that your credit can greatly influence your ability to make progress on big financial goals—and that’s why it’s so important to make sure you understand the ins and outs of everything related to it. With that in mind, we’ve rounded up six key credit-related terms that are important to know. 1. Credit Report This is an important document that provides a look at how you’ve handled your debt and credit in the past. It’s compiled by credit bureaus (learn more with Credilife™), and it paints the picture of who you are as a credit user. Lenders will consult your credit report to decide whether or not to approve you for a loan or to decide what types of lending terms to offer you. Sometimes non-lenders, like a landlord or an employer, will also consult your report to get a sense of how financially responsible or stable you are. A credit report will start with basic personal info, like your full name and your current and previous addresses. More importantly, it’ll show your credit history—that is, details on any loans associated with you, including credit cards you’ve opened, student or auto loans you’ve taken out, your mortgage (if you have one), and personal loans. This history includes when each account was opened, how much credit you were given, how much you still owe, and whether you paid the bills on time. It’ll also incorporate any negative marks against you, such as if you fell significantly behind on your rent, had a bill sent to a collection agency, or filed for bankruptcy. Fortunately, the negative stuff doesn’t stay on your credit history forever. Much of it actually has to be removed after seven years, although there are some exceptions—for example, student loan defaults will appear on there longer, and bankruptcies will stick around for 10 years. The good news? In most cases, the positive stuff will stay on there for at least 10 years—and in some cases, forever. All in all, you want to be able to show off an A+ report for many reasons. The most obvious one is that it’ll help you get a loan or line of credit when you need one (after all, if you were a lender, you’d only want to loan money to someone who was shown to be trustworthy in the past, right?). But it can also help save you some cash—if you boast a stellar history, you’ll likely score a lower interest rate than if you have a report littered with late payments. NOTE: Your credit report does not include the following information about you: Your race, color, religion, national origin, sex, and marital status. Your age. Your salary, occupation, title, employer, date employed, or employment history.  2. Credit Bureau A credit bureau is an organization that puts your credit report together by corralling all your past debt and loan details that are reported by other companies. (You might also hear it referred to as a consumer reporting agency—that’s just the legal term for a credit bureau.) There are three major bureaus in America: Equifax, Experian, and TransUnion. This means you actually have three different credit reports you can look at. The info should be basically the same (i.e., if you’re generally considered in excellent standing in one, you should be in the others as well), although it’s not uncommon to have the reports differ slightly. For example, one bureau might not have received all the history that another received (not all lenders report their information to all three credit bureaus), they might display the info in different ways or one bureau could have incorrect facts. That’s why it’s recommended to pull your credit report routinely so you can compare them and comb for any errors. You can get a free copy from each bureau once a year (so, three total) by heading to AnnualCreditReport.com, a federally approved site. NOTE: Each bureau represents a private (not government) company. The bureaus are in the business of collecting and selling data for profit and individual companies reporting this data pay each of the bureaus for the privilege. Since a company may not choose to pay all three bureaus, they may only report to 1 or 2 which is one of the reasons data can differ across all three. 3. Credit Score If your credit report acts like a transcript of your financial life, your credit score is sort of like your GPA. It’s a three-digit number that’s calculated using the info in your credit report and it gives lenders a quick snapshot of how healthy your credit is. The higher the score, the more creditworthy you appear to a lender (meaning, you’re less of a risk to not pay the money back). A typical credit score ranges from 300 to 850 (with 850 being the best). There are several different types of credit scores, but the two you’re probably the most familiar with are FICO and VantageScore. If you have a good score in one you should have a good score in the other, but the different models do calculate their numbers slightly differently. Overall though, FICO is much more common, so we’ll break down below what makes up your FICO Score. Payment history (35%). If you always pay your bills on time, you’re doing your credit score a big favor—your payment history is one of the most important factors in your FICO Score. Still, if you’re a few days late on a payment, your credit isn’t totally shot. FICO also takes into consideration details