All About (Your) Credit

And how to maintain or fix it.

Let's start with 2 promises:

Maintain a good credit score and you pay less. Period.

Buying? Renting? You pay less with a good score.

Bad credit scores can force you to pay more.

That's the reality.

And here's another reality:

Already have credit problems?
Just starting your credit journey?
Do you have perfect credit?

Doesn't matter.
We're all in the same boat....

Let's dive in a tad deeper with this video:

So, here's what credit is:

An arrangement for you to pay for something at a later date.

Kind of like... "Okay, gimme the car today, and I'll pay you later."

But there's a lot to it...

Do you know how important that credit score is to money in your life?

As said, a credit score tells businesses and employers how responsible you are with paying back loans and certain bills. Credit bureau agencies track your spending habits, and then rate you.

Credit scores are used (by about every business) to determine if you are trustworthy. And your credit score really does follow you everywhere.

That's why credit is so powerful.

In fact, it's one of the most powerful things you'll ever possess.

The Big Lesson:

You alone, are the main factor that determines what your credit score will be.

How empowering is that?!?

It means you can control it.

Think about this:

Do you have $10,000 in cash to pay for a new car?

No? Well, do you have $250?

Credit may let you pay the $250 down and borrow the rest.

These five actions usually determine your credit score:

1. Do You Pay On Time?

If you pay your bills on time, your credit score goes up. If you don't... Well. Duh!

2. How Much Do You Owe?

Do you have a loan? Do you have a balance on a credit card? How much "credit" you have outstanding determines part of your credit score.

3. How Long Have You Had Each Piece Of Credit?

Have you had a loan for 2 weeks, or have you been making loan payments for 5 years? The difference matters. A longer history of credit contributes to a higher score.

4. What Type Of Credit Do You Have?

A credit card with a $1000 limit is valued differently than a $250 credit card at the local store.

5. How Much New Credit Do You Have?

Did you just apply for 5 credit cards to get those cool "free" gifts? Your credit score likely went down as a result.

How do you know what your credit score is, right now?

Federal law mandates that the three national credit report agencies (CRAs) provide one free report annually. The three CRAs are Experian, Equifax, and TransUnion. The only official website for these free reports is Be sure to request reports from all three agencies because information reported to each differs.

Then again, most people find the credit report they get for free confusing or insufficient.

They take to credit scoring apps instead.

But is that a good idea?

The big key here is:

Does your credit union or bank offer a free credit score?

Between that and getting your free reports, you're covered!

How do you start building credit?

Or repair it when your credit is already hurt?

Everyone's credit situation is different and the suggestions shown here are a guide for improved financial awareness and not a guarantee of better credit. Slow down, weigh your options, and do your research.

Start with this video:

And then, follow these tips:

As you will see, following these tips will help you start building (good) credit.

1) Get a credit builder loan.

It's a small personal loan that many credit unions and community banks have to help you start building credit. If you pay this loan off correctly, you're off to start building great credit.

2) Get a secured credit card.

But do pick the right one, without high fees and costs associated with it. A secured credit card is a credit card on which you "borrow" money, but you have backup for that loan with a cash deposit. When using your card, if you borrow money and pay it off at the end of every month/cycle, you start building credit.

Big warning: A credit card can be a very dangerous way to build your credit, if you're not really careful. Credit card companies often charge you more than you can afford to pay off every month. Don't fall for that trick. Most consumer advocates say this: If you get a credit card, never charge more than you can pay off each month, unless the charge is for a real emergency.

3) Get a person with (good) credit to co-sign on your account.

If you're lucky enough to enjoy this perk, get someone to co-sign on your car loan. Or on a personal loan at the credit union or (community) bank. This can be a parent, a guardian, your spouse, or even your best friend.

With their help you can get the loan in your name, and if you paying off your loan correctly, you can start building great credit.

4) Pay your bills, always.

Make sure, especially if you're in college, your bills are in your own name, (your rent, your phone, utilities, etc.) and pay them on time, always.

Paying your utilities, and getting credit for it, can pay off. Credit bureaus can help you with this, if you are uncertain how to exactly.

5) Get a job, and keep it.

Credit reports also contain your employment history. If you have a good-paying job and you keep it, it will be reported and it will show that you can repay money you wish to borrow.

And then there are these two things to do... We'll classify them as "most important".


If you don't "pay as agreed" on anything, you will likely hurt your credit.


Most creditors will work with you to help you get caught up. Why? They want their money! If you ignore the problem, it will only get worse.

Okay, so are you ready to handle your credit now?

Following the practices that enhance your credit score, not coincidentally, can help you achieve overall financial well-being because they are cornerstones of good personal finance management.

So, if you haven't already, be sure to work through a few other FoolProof Solo modules next.

We'll see you off with a last message:

Even if you build good credit, it's unfortunately all too easy to ruin that reputation.

Below is how an ABC News producer lost thousands of dollars by hurting his credit making a few simple mistakes...

So, that can happen.

But not to you, because you know how to do this right!

Good luck out there, and here's to you and your good credit.

You Made It to the End... What's Next?

When you are done with this section, choose another module topic below to learn more.

Be a Healthy Skeptic


Money & You


Basic Budgeting


Advanced Budgeting


All About Credit


Debt Management






Impulse Buying


Value of Education