- Learn about credit card ownership and its risks and benefits
- Learn what a credit score is, what impacts a credit score, and how it reflects a person’s creditworthiness
- Understand what is include in a credit report
How to Use a Credit Card
The following video explains the difference between the statement balance and the outstanding balance of your credit card.
You can view the transcript for “Credit Cards for Beginners (Credit Cards Part 1/3)” here (opens in new window).
The following video explains how credit card interest works.
You can view the transcript for “How Credit Card Interest Works (Credit Cards Part 2/3)” here (opens in new window).
Check out this video for more information on how interest can work against you when you’re making minimum payments on your credit card.
You can view the transcript for “Credit Card Debt Explained With a Glass of Water” here (opens in new window).
Credit History and Credit Score
The Main Idea
A credit score is a numerical representation of a person’s creditworthiness based on their credit history. It is calculated using information from their credit report, including payment history, credit utilization, length of credit history, types of credit used, and recent credit inquiries. Credit scores typically range from 300 to 850, with a higher score indicating a lower credit risk and a better chance of being approved for credit or loans. Lenders and financial institutions use credit scores to assess the risk of lending money to an individual and to determine the terms and conditions of the loan.
You can view the transcript for “What is a Credit Score? Kal Penn Explains | Mashable” here (opens in new window).
Credit Report
The Main Idea
A credit report is a document that provides a detailed summary of an individual’s credit history. It includes information on the person’s credit accounts, such as loans and credit cards, as well as payment history, credit utilization, and any negative marks such as late payments or defaults. The report may also include information on bankruptcies, tax liens, and other financial obligations. Credit reports are generated by credit reporting agencies based on information provided by lenders and creditors. Lenders and other organizations use credit reports to evaluate an individual’s creditworthiness and determine the likelihood of the person repaying a loan or credit obligation.
Credit Score vs. Credit Report
Let’s compare a credit score to a credit report. While credit scores and credit reports are related, they serve different purposes and provide different types of information. A credit score is a single number that provides an overall assessment of a person’s creditworthiness, while a credit report is a detailed record of a person’s credit history that provides a more comprehensive view of their financial situation. Both are important factors in securing loans, credit cards, and other financial products, as well as in many other areas of life such as employment and housing.
| Credit Score | Credit Report |
|---|---|
| Numerical grade of credit worthiness ranging from 300-850 | A detailed record of a person’s credit history, including their credit accounts, payment history, outstanding debts, and other financial information |
| Derived from credit report | Lists all the factors in an individual’s credit history that impact their credit score |
| Calculated based on various factors, including payment history, credit utilization, length of credit history, types of credit used, and new credit | Includes personal information, credit accounts, payment history, public records, and inquires |