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We hear a lot about credit — credit reports, credit scores, credit freezes, credit monitoring. What does it all mean for you? Your credit matters because it affects your ability to get a loan, a job, housing, insurance, and more. It’s important to understand what your credit is and how to protect it.

What’s Your Credit, and Why Does It Matter?

When people talk about your credit, they mean your credit history. Your credit history describes how you use money. For example:

  • How many credit cards do you have?
  • How many loans do you have?
  • Do you pay your bills on time?

Grow good creditHow you handled your money and bills in the past will help lenders decide if they want to do business with you. Your credit history also helps them determine what interest rate to charge you.

  • If lenders see that you always pay your bills on time and never take on more debt than you can pay back, they’ll generally feel more confident doing business with you.
  • If they see that you’re late on your payments or owe more on credit cards or loans than you can repay, they might not trust that you will pay them back.

Who cares about your credit history?

Lenders, landlords, insurance companies, and potential employers are a few examples of who might look at your credit history. Your credit history can make a big difference when you

  • apply for a loan or credit card
  • look for a job
  • try to rent an apartment
  • try to buy or lease a car
  • try to get rental or home insurance

Because these lenders, landlords, and others care how you handle your bills and other financial decisions, you might want to care about your credit, too.

How Do You Know If Your Credit Is Good?

“Good” or “bad” credit is based on your credit history. You can find out what your credit history looks like by checking your credit report.

What’s in your credit report?

Your credit report is a summary of your credit history. The three major credit bureaus — TransUnion, Equifax, and Experian — collect credit and other information about you. In your credit report, you’ll find information like

  • your name, address, and Social Security number
  • your credit cards
  • your loans
  • how much money you owe
  • if you pay your bills on time or late
  • if you filed for bankruptcy

Businesses pay the credit bureaus to use that information to check your credit. They run a credit check, for example, before they decide whether to lend you money, give you a credit card, or rent you an apartment.

TIP: The credit bureaus must make sure that the information they collect about you is accurate. The Fair Credit Reporting Act (FCRA), a federal law, requires this. But you want to check your credit report regularly to be very sure the right information is there. If you find mistakes, you can dispute them.

How to get your credit report

You have the right to get a free copy of your credit report every year from the three major credit bureaus: TransUnion, Equifax, and Experian. Some financial advisors suggest staggering your requests over a 12-month period to help keep an eye on your reports and make sure they have accurate information. The best way to get your free credit report is to

Through December 2022, everyone in the U.S. can get a free credit report each week from all three national credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com.

And everyone in the U.S. can get six free credit reports per year through 2026 by visiting the Equifax website or by calling 1-866-349-5191. That’s in addition to the one free Equifax report (plus your Experian and TransUnion reports) you can get at AnnualCreditReport.com.

What’s a credit score?

A credit score is a number that’s calculated based on the information in your credit report. It helps businesses predict how likely you are to repay a loan and make the payments when they’re due. You’ll see lots of different scoring systems, but most lenders use the FICO score.

To calculate your credit score, companies first pull information from your credit report, like

  • how much money you owe
  • whether you’ve paid on time or late
  • how long you’ve had credit
  • how much new credit you have
  • whether you asked for new credit recently

Then, using a statistical program, companies compare this information to the credit behavior of people with similar profiles. Based on this comparison, the statistical program assigns you a score. Usually, credit scores fall between 300 and 850. A higher score means that you have “good” credit: businesses think you’re less of a risk, which means you’re more likely to get credit or insurance — or pay less for it. A low score means you have what businesses see as “bad” credit, which means it will be harder for you to get a loan or a credit card — and you’re more likely to pay higher interest rates on credit you do get.

How to get your credit score

Unlike your free annual credit report, there is no free annual credit score. Some companies you do business with might give you free credit scores. Other companies may give you a free credit score if you sign up for their paid credit monitoring service. This kind of service checks your credit report for you. Sometimes it’s not always clear that you’ll be charged for the credit monitoring. So if you see an offer for free credit scores, check closely to see if you’re being charged for credit monitoring.

TIP: Before you pay to get your credit score, ask yourself if you need to see it. Your credit score is based on what’s in your credit history — if you know your credit history is good, your credit score will be good. It might be interesting to know your score, but you can decide if you want to pay to get it. For more on credit scores, see the article Credit Scores.

How Can You Protect Your Credit?

Freezing your credit

A credit freeze (or security freeze) is a free way to limit who can see your credit report. If you’re worried about someone using your credit without permission — like an identity thief or a hacker after a data breach you might want to place a freeze on your credit report. A freeze makes it harder for someone else to open new accounts in your name. It also means you’ll need to temporarily lift the freeze if you apply for credit, since many banks and lenders do a credit check before approving new accounts.

Some things to keep in mind about credit freezes:

freeze out fraud

  • A credit freeze does not affect your credit score.
  • With a credit freeze in place, you can still
    • get your free annual credit report
    • open a new account. To open one, just lift the freeze temporarily. It's free to lift the freeze. You can place it again when you no longer need lenders to see your credit.
    • apply for a job, rent an apartment, or buy insurance. The freeze doesn't apply to these actions, so you don't need to lift it.

TIP: Even with a credit freeze, a thief can make charges on your existing accounts. You still need to monitor your bank, credit card, and insurance statements for charges or changes you didn’t authorize.

To place a free credit freeze on your credit report, contact each of the three nationwide credit bureaus:

Equifax

Equifax.com/personal/credit-report-services

1-800-685-1111

Experian

Experian.com/help

1-888-EXPERIAN (888-397-3742)

Transunion

TransUnion.com/credit-help

1-888-909-8872

If you ask for a freeze online or by phone, the credit bureaus must place the freeze within one business day. They also have to lift the freeze within one hour. If you make the request by mail, the credit bureau must place or lift the freeze within three business days. Remember that you have to contact all three bureaus. For more on credit freezes, read What To Know About Credit Freezes and Fraud Alerts.

Monitor your credit report

Because your credit report affects your ability to get loans, jobs, apartments, and more, you want to make sure there aren’t mistakes, and that no one has been misusing your personal information. You can do this in several ways:

  • Monitor your credit report yourself for free. Request your free credit report and review it to make sure there are no problems or mistakes. Look for things like
    • someone else’s information in your report
    • information about you from a long time ago (especially more than seven years ago)
    • information about your payment history or accounts that’s wrong
    • accounts that you didn’t open yourself — a sign that someone may have stolen your identity

If you find something on your credit report that shouldn’t be there, take steps to fix it. See the section below, “Fixing mistakes in your credit report." 

  • Accept free credit monitoring offered to you after a data breach. If your information was exposed by a data breach, many companies will offer you free credit monitoring. Take advantage of it. This is an opportunity to get free help watching your credit report and making sure nobody is misusing your personal information. For more information on what to do if your information was exposed in a data breach, go to IdentityTheft.gov/DataBreach.
  • Active duty military and members of the National Guard can get free electronic credit monitoring. To sign up, contact the credit bureaus.
  • Pay for a credit monitoring service. These services usually charge a monthly or annual fee. They keep an eye on your credit report for you and let you know if they see anything suspicious. Before you consider paying for these services, remember that you can monitor your own credit by obtaining your free credit reports and you have the right to freeze your credit for free.

TIP: Whether you monitor your credit yourself, get free credit monitoring, or pay a company to do it for you, it’s important to check in regularly to avoid any surprises. Find out more about credit monitoring in What To Know About Identity Theft.

Fixing mistakes in your credit report

The information in your credit report affects your ability to get a loan, an apartment, and many other important things in your life. You want to make sure that what’s on your report is right. If you find mistakes on your credit report, both the credit bureau and the person, company, or organization that put the wrong information there are responsible for correcting it. But there are steps you need to take first:

  • If your credit report has mistakes, but you haven’t experienced identity theft: First, tell the credit bureau, in writing, what information you think is inaccurate. Include copies of documents that support your position. The credit bureau must investigate your claim. It also has to contact the business that put the information on your report. (For example, if that wrong information has to do with your cell phone bill, the credit bureau will contact your phone company.) If that company finds that the information was, in fact, inaccurate, it must tell all three credit bureaus to correct your file.

Second, contact the company that reported the wrong information to the credit bureau. Do this in writing. Tell them that you’re disputing an item in your credit report. Get more information and sample dispute letters.

  • If your credit report has errors due to identity theft: You can block those charges from appearing on your credit report. Start at IdentityTheft.gov, an FTC website that will give you a personal recovery plan that walks through each step. It will also give you an Identity Theft Report that you can use to show that debts coming from identity theft are not yours.