As you learned in Vault, Credit Is: A loan that a person uses to pay for things, but is expected to pay back. Your credit shows how responsible you are with money.
In this section, you will be able to determine an appropriate credit rating for yourself, why you should have a high credit score, and what can help you obtain a high credit score.
Why is it Important to Build Good Credit: Your credit score shows how responsible you are with your money, and with the money you borrow to make purchases.
- Need to Build Credit to have your home or apartment hooked up to utilities – such as water, gas, electricity, cable, and internet.
- You need to have a good credit score in order to finance (be provided with money) large purchases, like a car, furniture, or a home.
- Employers check to see if you have good credit- remember, your credit score shows how responsible you are with money. If your score is high, it means you are responsible with money, and you’re likely to be a responsible candidate for employment.
- If you are looking to rent an apartment, you’ll need good credit- landlords typically will only rent to people with good credit, to ensure they are paid their rent every month on time.
- If you need a loan from a bank or credit union, you’ll need to have good credit. The bank or credit union will want to ensure you are responsible enough to pay back your loan.
How Your Credit Score is Calculated:
For more information, go to http://www.myfico.com/crediteducation/whatsinyourscore.aspx
How To Get Good Credit At Your Age
- Have your parent(s)/guardian(s) sign you up for a joint account credit card tied to their account
- Only use a credit card for small purchases you know you can pay off.
- Only make major expenses when it is an emergency
- Pay off your balance every month
- Always pay your bills on time
- Do not apply for several credit cards at the same time
- Do not cosign on a loan or credit card with friends
- Get and KEEP a job
- Have a checking and a savings account open at a bank or credit union
- Make a budget every month, AND STICK TO IT
Common Scores Seen in the United States:
Advantages and Disadvantages of Using Credit
Advantages of Having Good Credit
- Using credit provides you with a record of your purchases
- Being able to purchase needed or wanted goods and services using anticipated income
Disadvantages of Having a Poor Credit Score
- You could be in financial trouble if your score is low
- Overspending becomes very easy
- Interest Payments become very high
Calculate Your Credit Score