Credit is the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
For example, I could walk into a cell phone store and "buy" a brand new cell phone on credit, which means that I would have to pay off the cell phone over a stipulated period of time, but the only reason I was able to do so was because I had a good credit rating.
What is a good credit score?
While different lenders have their own standards for rating credit scores, 700 and higher (on a scale of 300 to 850) is generally considered good.
Lenders typically use your 3-digit credit score to help them decide if they'll approve you for a loan or credit card. In general, the higher your score, the better your chances of getting approved. Having a good credit score can also help you save on interest rates.
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The easiest way to get a credit rating on your account would would be to open up a small clothing account with an inexpensive clothing store, and to pay money into your new clothing account every month in order to reassure banks and other financial institutions that you are not a risk to lend money to when time comes to buy that house or car.
If you already have a credit score, and it's one that causes retail stores and financial institutions to prevent you from getting that new phone or home loan, here is why they don't seem to like you and a few tips on how to improve your credit score.
Thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score. Completely ignoring your credit cards bills is much worse than paying late. Each month you miss a credit card payment, you're one month closer to having the account charged off.
Maxed out and over-the-limit credit card balances make your credit utilization 100%. This is least ideal for your credit score.The second most important part of your credit score is level of debt, measured by credit utilization. Having high credit card balances (relative to your credit limit) increases your credit utilization and decreases your credit score. Credit inquiries account for 10% of your credit score. Making several credit or loan applications within a short period of time will cause your credit score to drop. Keep applications to a minimum.