Financial Education
Credit 101
Everything you need to know about credit — explained simply and clearly.
What Is Credit?
Credit is a financial tool that lets you borrow money now and repay it later. When you use a credit card, take out a car loan, or finance a home, you're using credit.
Lenders use your credit history to decide whether to approve you for new credit and at what interest rate. A strong credit profile means better rates, higher limits, and more financial opportunities.
Understanding Your Credit Score
Your credit score is a three-digit number — typically between 300 and 850 — that summarizes your creditworthiness. The higher the number, the better.
What Makes Up Your Score?
Payment History
35%Whether you pay your bills on time. The single biggest factor in your score.
Amounts Owed
30%How much of your available credit you're using — your credit utilization ratio.
Length of Credit History
15%How long your accounts have been open. Older accounts generally help your score.
Credit Mix
10%The variety of credit types you have — cards, loans, mortgages, etc.
New Credit
10%Recent applications for new credit. Too many hard inquiries can lower your score.
Your Credit Report
Your credit report is a detailed record of your credit history — every account, balance, payment, and inquiry. It's the raw data that credit bureaus use to calculate your score.
You're entitled to one free credit report from each bureau every year at AnnualCreditReport.com. Reviewing your report regularly helps you catch errors and signs of identity theft early.
The Three Credit Bureaus
Three major companies collect and maintain your credit data. Lenders may report to one, two, or all three — so your reports can differ slightly between bureaus.
Equifax
One of the oldest credit bureaus, Equifax collects data on over 800 million consumers worldwide and provides credit reports, scores, and identity protection services.
Experian
The world's largest credit bureau by revenue, Experian operates in 44 countries and offers credit monitoring, fraud alerts, and free credit score access.
TransUnion
TransUnion serves over 1 billion consumers globally and is known for its credit lock feature and detailed credit monitoring tools.
How Credit Works — Step by Step
You Apply for Credit
A lender pulls your credit report and score to evaluate your application. This is called a hard inquiry.
Lender Reports Activity
Once approved, your lender reports your account details — balance, limit, and payment history — to the bureaus each month.
Bureaus Update Your File
The bureaus add this data to your credit file. Your score is recalculated based on the updated information.
Your Score Reflects Your Habits
On-time payments build your score over time. Missed payments, high balances, or collections drag it down.
Ready to Take Control of Your Credit?
LJ Financial Solutions helps you understand what's on your report and take the right steps toward a healthier financial future.