At this point, you have likely already taken advantage of some form of credit or loans options. Maybe you have taken out a student loan, or perhaps you have a credit card for emergencies or to spread out large and small expenses. Typically, credit comes in two forms: installment loans and revolving credit.
Installment Loans: Loans taken out for a specific purpose that must be payed back in regularly scheduled payments. Examples of this include auto loans, student loans, mortgages, and personal loans.
Revolving Credit: A line of credit that allows the account holder to repeatedly borrow money, just so long as they do not exceed their credit limit and regularly pay a minimum balance on their account. Examples of this include traditional credit cards (Mastercard or Visa) or store credit cards.
Both forms of credit can be useful for individuals because they are able to manage large expenses while also establishing a credit history, which can improve your credit score if you make your payments on time. A high credit score, also known as a FICO score, gives lenders a picture of your credit worthiness and level of risk. This can negatively or positively impact your ability to receive loans and credit in the future.
There are three credit reporting agencies, also know as credit bureaus, that collect information on your credit and financial history: TransUnion, Experian, and Equifax. Credit reports are a summary of your personal credit history. You are entitled to free annual credit report from each of the three credit reporting agencies. To access your FICO credit score, you may have to pay additional fees.