Credit is defined 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. Experian defines credit as “borrowed money…from a credit grantor, whom you agree to pay back the amount you spent, plus applicable finance charges, at an agreed upon time.”
Credit scores can range between 330 and 830, with 830 being considered the best. The better your credit score, finance charges will typically be lower than someone with a terrible credit score. The four types of credit are; revolving credit, charge cards, service credit, and installment credit.
Why do you need credit?
Unless you have large amounts of cash, you will most likely need to have good credit to participate in this economy as a consumer. People who live on their own will have to obtain some form of service credit in the form of rent, or obtaining utility services like electricity. Your credit score, which is based on your credit history, will determine the amount of payment required before you can obtain these services. Once again, the better your credit, the less cash you will have to use to initiate an account or even renting an apartment.
Any other large purchase you make without having the all of the money will require you to have good credit. Revolving credit services like credit cards are based on your credit score. Credit limits can be increased and interest rates (applicable finance charges) can be lowered with good credit.
This is why you fix your credit.
The number one financial issue that has a negative impact on your credit score is debt. In order to fix your credit, you must first pay off your outstanding debts. Fixing your credit is a process that requires you to improve your financial habits to prove that you intend to create a better credit history. Keep your current debt balances low. Keep them low by not making new purchases and creating new debt.
This simple technique will help improve your credit score and start you on your way to fix your credit. It may or may not be enough to fix your credit. Speak to a credit repair expert to determine a sound strategy to fix your credit.