Credit Explained

What is Credit?

Using credit might seem easy. You buy a new pair of shoes, gas for a road trip, or pay for dinner by simply handing over a credit card and signing a receipt. Using credit allows you to pay for things you do not have enough cash to cover or it allows you to spread your payment over a couple of months. But you want to be sure the way you're using credit is better for you than it is for the credit provider.  For a free annual copy of your credit report visit Annual Credit Report.


Credit Report and Credit Score

A credit report is your financial transcript. This focuses on who you are, how much debt you have, payment history, and any public records associated with your name.

A credit score is your financial GPA. The score summarizes your credit history and lenders use your score to grant/deny you credit. It also is used to determine what terms you are offered and the rate you will pay on a loan. In a breakdown, it looks at your payment history,  amounts owed, types of credit, length of history, and new credit.


Good vs. Bad Credit

Having a higher credit score allows you to get access to lower interest rates, pay less for borrowing money, and have better access to lenders. On the other hand, having a low credit score results in higher interest rates, paying more over the life of the loan, and getting denied lines of credit.

credit score ranking

Building good credit is like planting a seed. With attention and responsible care, it will grow!
cultivating credit score

Learn more about credit score in this video!

Credit score explained

Page last modified September 1, 2022