Too often in today’s day and age young people miss out on opportunities from lack of information. This article is written to inform all about the basics of credit.

Payment History is the largest factor in your credit. It’s also one of the hardest items to correct. So pay attention to the bills that are 30,60,90 days behind. Once they hit your credit they can be almost impossible to remove. Some creditors can choose to remove the credit hit with a payment, others may not.

Amount Owed is the second largest factor. Keep watch on what they call the “Utilization”, meaning the amount of debt you have compared to the amount of credit you have. For example, if you have $10,000 worth of credit cards, if you have $5,000 of debt then you have a 50% utilization rate. As long as you’re under 33% it should not affect your credit negatively. But your goal should be to pay all credit down to zero by the end of that month. Revolving credit (credit cards) are not meant to be held month over month, the interest rate will catch up with your swiftly.

Length of credit history is the next largest factor. This tends to hurt young people, once you open a credit line, keep it open. The average credit history will grow with you.

Type of Credit is the next factor. School debt, credit card debt, car debt are the common types of credit lines. If you have more than one credit card this will help your type of credit category. Properly manage all of them. Again the goal is to pay all revolving credit to zero every month.

New Credit is the final component taken into consideration in your credit. Try not to open another line of credit for one to two years before a major purchase like a house. Opening new lines will also count against your length of credit history category.

The chart below explains in a clear pie chart the overview of the conversation. Print it, post it somewhere easily accessible. When you’re ready to buy that next car or purchase that first home, you can use this chart to confirm if your credit is in order. There’s also third-party software such as which will give you an ongoing report and update as factors move up and down on your credit.

Jerrod Delaine