There’s a lot credit can do for you. In fact, access 

to credit can be a lifesaver. But credit makes 

spending easy, sometimes too easy. So you can 

find yourself in credit trouble if you’re spending 

more than you can afford to repay.


If you’ve ever had a loan or used a credit card,  

you have a credit report and a credit score.  

Here’s how it works: Credit reporting agencies  

collect information from lenders and public 

records, summarize it into a report, and distill  

it into a score using a formula—often one  

developed by FICO


. A FICO score ranges from 

300 to 850, with the average score around 730. 

Your FICO score not only indicates how you’ve 

used credit in the past, but it helps to determine 

your access to future credit and what that credit 

will cost you. For example, repeatedly late or 

skipped credit payments could limit your ability to 

get a car or mortgage loan or increase the interest 

rate you’ll have to pay if you are offered one.

Everyone is entitled to one free credit report 

from each of the three major credit reporting 

agencies once every 12 months. To  

access your report, all you have  

to do is go to www.annual 

creditreport.com and  

follow the directions. If  

you spread your requests 

over the year, asking for one 

report every four months, you’ll  

always have a sense of where you stand. 

Some banks and credit card companies  

will provide your credit score for free, but often 

there’s a charge. If you’re about to apply for a 

major loan, it might be worth paying to see your 

score. But first find out which score the lender 

uses and request that one. Scores vary among 

agencies, and may be calculated differently for 

different end users, such as lenders or employers.

There’s more information on scores and other 

aspects of credit at www.myfico.com.


If you’re building—or rebuilding—your credit 

history, there are some basic steps to follow:

  Find a good credit card and use it  

regularly, paying for your purchases on  

time—and in full, if possible—every  

billing period

  Use only a portion of your card’s line of  

credit, ideally 30% or less

  Apply for a loan, perhaps to buy a car  

or pay for education not covered by  

your GI Bill, and repay the loan on time 

  Restrict your applications for new credit,  

particularly new credit cards 
There aren’t any quick fixes if you have  

credit problems, but over time you can repair  

your history and make a good case to lenders  

that you’re creditworthy.

Using Credit

Credit makes life easier, but it can be a trap.

If you are turned down for credit, or you’re 

offered an APR that’s higher than the best one 

the lender is advertising, you must be told which 

credit reporting agency’s credit score the lender 

used and what your score was. The agency must 

also provide a free credit report if you request it.

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