Credit is important if you want to accomplish things like leasing or buying a car, renting an apartment, buying a home, getting a job or getting approved for a credit card. Most banks and creditors will look at your credit score (a number usually between 300 and 850 that serves as a summary of a person’s creditworthiness) to assess whether or not to give you a loan or credit card. Consider this basic information to help you understand the importance of credit and your credit score:

What is a credit score?

Many consumers have their own history of financial transactions in their name that add up to an overall score. Credit agencies keep records of your history of payment, how many credit cards you have, how much you owe and other factors. Based off of the data on your credit report, a number is generated by each credit bureau to allow lenders to determine the risk of lending you money, also known as your creditworthiness. With different scoring formulas available, it’s important to know what is taken into consideration. Some of the common factors that make up your credit score are your payment history, the amount you owe as compared to available credit, the number of open accounts you have and how long you’ve had each account.

What can a good credit score do for me?

A good credit score can enable you to obtain a credit card, take out a loan or even rent an apartment. A good credit score encourages lenders to loan you money. You may be able to get a lower interest rate on a credit card, allowing you to save money to put in your pocket or help while repaying your balance.

What if I don’t have a credit score?

Not having a credit score isn’t necessarily a bad thing, it just means you’ll have to start accruing some debt, paying it off and building your credit history. If you’re new to credit, there are a few things you can do to get started. One thing you can do is apply for a credit card that is aimed at new users, such as a secured card or student credit card. If you are a student, there are credit cards designed with you in mind that offer tools to guide you through your new credit card journey, a moderate credit line to encourage responsible spending, along with rewards tailored to your spending needs.

How do I build or establish credit?

Practicing good spending habits can help build your credit history. Begin by making smaller purchases and paying them off on time. Payment history is a significant portion of your credit history. Creditors pay close attention to whether or not you make your payments on time. If you have a credit limit on your card, keep your balances well under your credit limit. Also, keep the number of credit cards you have to a minimum – every new credit card is another item for creditors to review.

How can I review my credit report?

There are a few simple ways you can monitor your credit report. Each year by law, you can access your credit report from each of the three major credit bureaus at Be sure to check for any errors such as late payments, amounts owed associated with your accounts and even your personal information. Any change in your credit report usually takes around a month to reflect in your credit score. Set up reminders for payments and consider automatic payment schedules to avoid a late payment.

Published February 25, 2015

Updated January 11, 2021

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