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Credit Basics

Credit can be a valuable tool to help you meet your financial goals. That’s why it’s important to understand what credit is, how to manage it, and what you stand to gain from establishing and maintaining good credit.

  • What is credit? 

Credit is your ability to obtain the goods or services you want now by promising to pay for them later. Your ability to obtain credit is based on your credit history.

  • How does credit work? 

Lenders like Wells Fargo and other financial institutions extend credit by lending you money at an agreed-upon amount, rate, and payment term. When you borrow, you begin to establish a credit history: this is a record of your credit accounts, your payment history, and the details of how you manage each account. This information is gathered by the three national credit reporting agencies (Equifax, TransUnion and Experian) and the data is used to calculate your credit scores. To understand what makes up your credit score, review how credit scores are calculated.

  • What are the benefits of good credit? 

Good credit can give you access to more borrowing options, such as paying for a car, a home, or an education at the best possible interest rate or terms. In addition, employers, insurance companies, landlords, cell phone providers, and more can use your credit history when they make decisions about you.  

Good credit takes time to establish. Explore ways to build credit so you can lay a solid foundation for your credit history.

Your credit report

Learn what you need to know about your credit score and credit report.

Understand credit scores and reports