Credit (as in credit scores)

Question

Hi friends,

What is credit? How do I grow my credit? I’m not even sure what other important questions I should be asking.

My parents are immigrants and I’m also one. I moved to the U.S when I was 11. Unfortunately my parents didn’t have the chances that I had and they didn’t get much of an education. Sometimes I feel like I’ve had to navigate a lot of life in the US by myself (SATs, college applications, school loans, etc.) on top of helping my parents navigate it too. I’m a young adult now and I don’t have any guidance and would really like to start thinking about my future. I think credit is a good place to start. Any info/advice is welcome, I literally barely know much about the system. Thank you.

In: 6

Answer 1

Let’s say you have 3 people. Alice is your dear friend. You’ve known her for 20 years. Every time you lend her $20, she pays you back $20 and gives you a beer. Bob, isn’t quite so great. You’ve known him for almost as long as Alice. He pays you back sometimes. Other times, his wallet is empty, and he says he can’t pay you back, he’s having a rough time. And Cynthia. You just met Cynthia. You have no idea who she is really.

Alice has good credit. Bob has bad credit. Cynthia has no credit.

Now, if you’re deciding to lend money out, you’re most likely to lend it to Alice… second most is to lend it to Bob. And you’re not going to lend money to Cynthia… not until you get to know her better.

Your credit score is just a numerical value that measures how likely you are (based on past history) to pay back a loan. If you pay all your credit cards, and have done so for years, you’re an Alice. If you pay back your credit cards, but sometimes you miss a payment, and maybe even default on a loan, you’re a Bob. And if you’re just starting out, you’re a Cynthia.

It can be hard to build credit if you have no credit, but there are ways. Try to get a credit card with a low limit, and just pay it off every month for a year or two. Then call and ask them to increase the limit. Pay your bills on time, and keep accounts open for years.