Start understanding credit now - you will be thankful later. You have the power to control and change it and that can go a long way towards bringing you financial freedom.
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A "credit score" is a measure of credit risk calculated from a borrower's credit report using a standardized formula. Factors that can affect a credit score include payment history, credit references and credit card use. A "credit report" is a detailed report of a borrower's credit history prepared by a credit bureau and used by lenders to determine an applicant's creditworthiness. Learn more about Credit Reports and Credit Scores
A credit history summarizes certain types of credit you use such as, credit cards, loans and financing plans. It also shows whether you have made your payments on time. An individual's credit history is dependent on a number of factors including, but not limited to, the total amount borrowed, the amount of available credit remaining and timeliness of payments. Good credit history generally means you are managing your outstanding loans properly by paying the required amounts owing on your loans on time and lenders feel confident about lending you money. Bad credit history means you are not managing your outstanding loans properly. For example, you have a history of not paying the required amounts owing on your loans on time. Bad credit history will make it harder to qualify for loans and/or to get low interest rates. No credit history means you do not have anything on your credit report. As a result, a lender is unable to assess your credit risk.
Establishing good credit tells others that you are financially trustworthy. When you use a credit card to make a purchase, you enjoy the safety of not having to carry a lot of cash. You have the peace of mind that comes with having a financial security blanket for emergency needs and you are protected against financial loss if your credit card is lost or stolen. Learn how to protect your credit at Security Tips.
It all boils down to paying your bills consistently and on time. Always pay at least the minimum amount due and always pay on time. Learn more about building good credit at Managing credit.