Credit is money that a financial institution or business will allow someone to use to pay for goods or services before payment.
Credit is important because in today's world life is run off of credit and in the future you will most likely need to borrow money from a lender. Credit is the solution. It's all a matter of how you manage it.
A credit score is a numerical representation of someone's credit history. This number shows the Risk of lending money and it Affects the interest rate offered to someone.
Someone's credit score will then become a rating. The higher your credit score, the higher your rating. The goal is to keep it at the numbers 650 and above for Fair-Excellent credit.
Everyone who has credit gets a credit report which is a report of someone's credit history.
Credit Reporting Agencies collect information about your financial activity to generate your credit score and reports. There are 3 CRA's which are Experian, Equifax and Transunion.
There are 5 components that make up your credit score which are: your payment history, Amounts owed, Length of credit history, New credit, and The types of credit in use.
One way a teenager can build good credit would be to have their parents co-sign for them. Teens should make sure they do not take out too many loans at one time and they should check their credit report daily. And they should always keep the borrowing below the maximum. And Finally, pay as much as you can at the end of each grace period.