Credit is something that we have all used in one point of our life. If you have yet to used credit, perhaps you might've heard about it before. First, in order to understand credit we must know what it means, what it is used for, and how you are graded on it.
The Oxford English Dictionary defines credit as: 'the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.'
If you have had the not so best experience with credit your definition could go more along the lines of this: 'a 3 digit number that can either help you live a great life or an absolutely financial disaster.'
If, the second definition sounds a bit more like you. Have no worries we are here to help. Now that we know what credit is, let's move forward to what credit is used for.
Many of us aren't able to buy a new $25,000 car cash from the dealership. So this is where credit comes in. We find a car we like and we try to purchase it by making monthly payments on it. The amount of money we put down, the interest rate, and monthly payment are all determined by our credit score.
If you do have a poor credit score, our best suggestion would be to hold on the car shopping. This is because poor credit can cost you a lot of money. Read our previous article here to find out exactly how much you are going to be over paying.
Now that we know what credit is and what it is used for. Let's find out how they come up with our credit score. Although there is still missing information to the formula that makes our credit scores we do know of 5 main components.
Right off the bat, we can say payment history and capacity being the heavy graders. So if you want to quickly increase your credit score. Make sure to watch our YouTube video on this topic for some quick credit tips.