Why is credit important?

Watch the video to get a brief overview of how credit works, what your credit history is, who looks at it, and why it's important.

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How does credit work?

Credit is borrowing money to buy something today, knowing that you will have to pay it back later, usually with interest. When used correctly, it can help you maintain financial flexibility and build your credit.

Each month, you have to pay at least the minimum on your credit card statement, but you can pay more. If you don't pay back all of the balance every month, you'll be charged interest, which is a percentage of the balance.

How you pay your bills and manage your credit affects your credit history and impacts your ability to get other types of credit in the future. With credit everything is tracked and measured.

And remember, debit and prepaid cards do not help you build credit.


There are many reasons to build good credit

credit card icon
credit card icon

Saves you money

Good credit often lowers your interest rate. That means that borrowing money can be less expensive overall.

Automobile icon
Automobile icon

Helps in
emergencies

When you build credit history, you may have credit available to help you get the things you need for emergencies and unforeseen expenses.

house icon with a dollar sign inside of it
house icon with a dollar sign inside of it

Opens the door to financial possibilities

Show that you can use credit wisely, and when the time comes to buy a car or a house or to start your own business, you'll have more opportunities to borrow money.


When is a good time to start?

Building credit is a journey that takes time, so it's best to start sooner rather than later. Carefully managing your first credit card or loan teaches you how to be financially responsible and helps build a positive credit history. And it can help set the stage so that you can finance the things you need and want later.

Where should I start?

You may already be building your credit history now. Your credit card and loan payments are reported, so remember to always pay them on time! Debit cards and prepaid cards aren't reported, so they don't help you build credit.

Good credit
is the key

Credit plays an important part in meeting your life goals. Building good credit can help you unlock the path to getting a car, starting your own business, and buying your own home.

Good credit
is the key

Credit plays an important part in meeting your life goals. Building good credit can help you unlock the path to getting a car, starting your own business, and buying your own home.

Having good credit is important for making big purchases.

Who gets the apartment?

Apartment mangers often check credit scores to make sure a potential renter has a good history of paying on time. If you have no credit history, they may offer the apartment to someone with a strong history instead.

You get no credit by using debit cards and cash. Using credit cards regularly and responsibly will give you good credit.
You get no credit by using debit cards and cash. Using credit cards regularly and responsibly will give you good credit.
Apartment building

Who gets the apartment?

Apartment mangers often check credit scores to make sure a potential renter has a good history of paying on time. If you have no credit history, they may offer the apartment to someone with a strong history instead.

Graphic representing a man who has no credit

Uses debit cards and cash

Graphic representing a woman who has good credit

Uses credit card regularly and responsibly

 

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check box on check box on check box on check box on

Follow these guidelines and use your credit responsibly, and you’ll be on the path to good credit.

For more about building and managing your credit, visit our Smarter CreditTM Center.