What is Credit?
Credit is your financial reputation—it represents your ability to borrow money and repay it over time. Lenders, landlords, and even employers may review your credit history to assess your reliability. Having good credit can open doors to better loan rates, housing opportunities, and financial freedom.
Your credit is determined by several key factors, including:
- Payment History – Making on-time payments helps build a strong credit score, while missed or late payments can negatively impact it.
- Credit Utilization – Using a low percentage of your available credit shows responsible credit management.
- Length of Credit History – A longer credit history can positively impact your score, showing lenders a track record of responsible borrowing.
- Types of Credit – A mix of credit types, such as credit cards, auto loans, and mortgages, can demonstrate your ability to manage different forms of debt.
- New Credit Inquiries – Applying for multiple credit accounts in a short period may lower your score temporarily, so it's best to apply strategically.
Building and maintaining good credit takes time, but responsible habits can help you achieve financial success.
Manage Your Credit Through Online and Mobile Banking
Understanding and monitoring your credit score is key to maintaining financial health.
With My Credit Manager, available in our online and mobile banking, you can easily track your credit score, review insights, what impacts your score, set up credit alerts and more—all without impacting your score. Stay in control of your financial future with real-time updates and personalized recommendations.
Understanding terms like APR, credit utilization, and credit history helps you make sense of your credit report and score.
-
The yearly interest rate charged on a loan or credit card balance, expressed as a percentage.
-
The amount of money owed on a credit account, such as a loan or credit card.
-
A company that collects and maintains credit information, such as Equifax, Experian, and TransUnion.
-
A record of a person’s borrowing and repayment activity, used by lenders to assess creditworthiness.
-
The maximum amount a lender allows a borrower to charge on a credit card or line of credit.
-
A detailed record of an individual's credit history, including accounts, balances, payment history, and inquiries.
-
A numerical representation of a person's creditworthiness, based on their credit history, ranging from 300 to 850.
-
A percentage that compares a person’s monthly debt payments to their gross monthly income, used by lenders to assess financial stability.
-
A credit check performed by a lender when a person applies for a loan or credit card, which may slightly lower their credit score.
-
A loan repaid in fixed amounts over time, such as a mortgage, car loan, or student loan.
-
A payment made after the due date, which may result in fees and negatively affect credit scores.
-
The smallest amount a borrower must pay on a credit card each month to avoid penalties.
-
A type of credit that allows borrowing up to a set limit and repaying over time, like a credit card or line of credit.
-
A credit card backed by a cash deposit, often used to build or rebuild credit.
-
A credit check that does not impact credit scores, often done for pre-approvals or personal credit monitoring.
-
The percentage of available credit that a person is using; lower utilization typically leads to a better credit score.
What Is Credit - AACU Credit Basics FAQs
Your credit score is shaped by payment history, credit utilization, length of credit history, types of credit used, and recent credit inquiries. Payment history and utilization typically carry the most weight. Review Debit & Credit Card Management for card-related account tools.
My Credit Manager, available through AACU own online and mobile banking, lets you track your score and review insights without any real impact to your credit. Review Online & Mobile Banking to set up My Credit Manager.
Applying for several credit accounts in a short window can lower your score temporarily, since each hard inquiry is factored into your credit history. Applying strategically helps limit this effect. Compare Personal Credit Cards before applying for a new card.
Lenders like to see a mix of credit types, such as credit cards, auto loans, and mortgages, since it demonstrates your ability to manage different forms of debt responsibly. Compare Auto Loans if you're building credit with your next loan.
Building strong credit takes time and consistency, since length of credit history is one of the factors lenders weigh most heavily. Making on-time payments early and often matters most. Check your eligibility to open your first AACU account.