Credit CardsBecoming a credit expert is easier than you might imagine. With a little bit of research, you can be a credit expert and take charge of your finances. It is almost impossible in this day and age to not have a credit history. As an adult, the ubiquity and ease of use means that you probably have multiple types of credit. Behind the scenes though, there are some important things you need to know. Failure to take care of your credit rating can prevent you from renting an apartment, buying a house, buying a car, or in some cases even getting a cell phone. Credit is everywhere so you need to be a credit expert to identify and avoid the pitfalls that come from abusing it.

What Is Credit

The first step to becoming a credit expert is to understand what credit is. Credit is borrowed money you can use to buy goods and services. Credit is given by a credit grantor with the expectation that the money will be paid back, often with the addition of interest. The interest is what the grantor gets out of the deal. You get some money you don’t have, to buy things you want or need. The credit grantor gets their money back with a little extra for their effort and trouble. It’s a mutually beneficial relationship. Which might explain why it’s so common.

Types of Credit

Next on the path to becoming a credit expert is knowing the four different types of credit you can get. Most people will have more than one of the below types of credit. Each credit type has its pros and cons. As a credit expert, you need to understand how they work so you can make them work for you.


Think credit cards. With revolving credit, you are given a limit for how much the credit grantor will advance you. Each month you typically make a payment towards the balance and any remainder is carried over. Carrying over, or revolving this debt, is where the name revolving credit comes from. A revolving credit card or account allows you to pay a minimum balance instead of the full balance each month.


A charge card is just like a credit card or revolving account above, except that the balance must be paid in full each month. Unlike the revolving account, the balance cannot carry over from one month to the next. There is less risk to the grantor with a charge card because they do not have to carry as much debt as they would in a revolving account.


Service accounts are just like the above two types of credit accounts. A credit expert needs to know that many of the services and utilities you get like electricity, telephone, cable, gas, etc are service accounts. The provider is extending you a line of credit for the services they are providing. You then repay the credit grantor each month in the form of paying your electric bill for example.


An installment account requires that the total amount of money given be repaid in fixed monthly installments. A car loan is an installment loan. If you finance a car, or a home for that matter, you are agreeing to repay the total amount borrowed over a set period of time. Each month you make a payment that covers both the principle and interest on the loan.

The Credit Bureaus

There are three main credit bureaus that every credit expert should know about. These bureaus exist to provide credit grantors with the information they need to make smart decisions about who to loan money or give credit to. The credit bureaus are private institutions that collect information from various sources and then sell it to credit grantors. They collect information like what kind of credit account(s) you have, what your credit limits are, how much money you earn in your salary, if you have been late or delinquent in repaying your loans or credit accounts, and many more data points.

Credit Bureau Logos

All of this information is useful to organizations and people that loan money or give credit to others. They can use the data to avoid lending money to someone who has a long track record of not paying it back. Or even not paying it back on time. For a credit grantor, having a good idea if the person you are loaning money to is likely to pay you back on time is something you would want to know.

There are three main credit bureaus in America that collect financial information on you. There is no feasible way to opt-out of their monitoring or data collection. Your bank, utility companies, car company, and anyone that you make regular financial transactions with report your information to these credit bureaus. The credit bureaus are:

Credit Scores and FICO

Each of the credit bureaus uses a model to calculate your credit score. Your credit score is a numeric representation of your creditworthiness. The “gold standard” credit score model was introduced in 1989 by Fair, Issac and Company. It was called the FICO Score. Equifax uses the FICO model to calculate your credit score, however, Experian and TransUnion use their own proprietary model which is loosely based on the FICO model. Many websites that claim to provide your free credit score also use their own proprietary model. Unless they say you’re getting a FICO score, you are getting a FAKE-O score.

The number is your credit score and it represents many variables, most of which are secret. Credit scores range from 300 to 800 with 300 being Very Bad and 800 being Excellent. The higher the number, the better your creditworthiness. Following this guide and putting in the work to become a credit expert will put you on the road to 800.

Credit Score Chart

The FICO model consists of five weighted components. Each of the below components plays a factor in determining your FICO score.

  • 35% Payment History
  • 30% Debt Burden
  • 15% Length of Credit History
  • 10% Types of Credit Accounts Used
  • 10% Recent Credit Inquiries

Monitor Your Credit Report Like a Credit Expert

Credit bureaus cast very wide nets to collect as much information as possible about each American. Sometimes they get incorrect information or get information about two people mixed up. Unfortunately, it is each individual’s responsibility to monitor their credit report at each bureau and report any incorrect information. It is in your best interest to do so because erroneous information in your report can negatively affect your credit score and impact your ability to make purchases, rent or buy houses, and even get a job.

Credit ReportTo ensure you can fulfill your duties of monitoring your credit report, the Fair Credit Reporting Act mandates that everyone is entitled to receive a free copy of their credit report from each bureau once per year. There are lots of sites that claim to give you this information but it is always best to get it directly from the credit bureau. Many of the free credit report websites will pull the actual credit file from the bureaus, but they may use a proprietary model to calculate a FAKE-O credit score.

It is crucially important that you follow through with this and stay diligent. Freezing your credit is one way to help and is covered below.

Freeze Your Credit

A security freeze, also known as a credit freeze or a credit block, is a formal process where you can lock the ability to add new credit accounts like credit cards, loans, and accounts to your credit. The terms security freeze and credit freeze are synonymous and are used interchangeably from one credit bureau to another. A major step in becoming a credit expert is understanding credit freezes and using them wisely.

Freezing your credit is easy. We have created a guide for each of the three major credit bureaus here on this site. Each guide walks you through the setup process and tells you what to expect. You must follow the process for each credit bureau. There is no “easy button” for this process, unfortunately. The time you spend completing these setup processes is invaluable. A few minutes out of your day today can save you an immeasurable headache and anguish tomorrow. Freezes are a credit expert move!

Practice Good Hygiene Like a Credit Expert

In closing, being a credit expert is easy, but you have to follow good credit hygiene. Using the below guide you can take charge of your credit and raise your credit score.

  1. Pay your bills on time. This is 35% of the FICO model calculation so it weighs a lot. Be on time. Everytime.
  2. Keep your debt to credit ratio low. If you are using more than 30% of your available credit you can be penalized in the FICO calculation.
  3. Don’t close out credit accounts. If you stop using a credit card keep it open. The length of time you have had credit accounts is important.
  4. Having a variety of credit account types is good for your score.
  5. Keep the hard credit inquiries to a minimum. It’s only 10% of the FICO model, but racking up too many in a short period of time can hurt your score.

If you read this guide and learned something new, you are well on your way to being a credit expert. Practice good credit hygiene and treat your FICO score like a high score starting today!