For most people credit is important for big-ticket items such as homes, automobiles, appliances or educational purposes. Very few people have enough cash saved for all major purchases.

Some households lack enough emergency funds to cover unexpected expenses. Having credit available during times of financial emergencies can be very important.

Credit is a convenience. Credit cards can eliminate the need for carrying large sums of cash or writing numerous checks. In many locations and stores, a credit card is accepted more readily than a personal check.

Using the product while paying for it is another advantage. Some people prefer making payments while enjoying a purchase, rather than setting aside money for future purchases.

Credit allows consumers to take advantage of seasonal sales or to avoid anticipated price increases.

Some interest and finance charges can be claimed as deductions on federal income taxes.

How to Qualify for Credit

While companies use various criteria to judge your credit qualifications, your ability to repay debt and the willingness to do so are some of the primary considerations. While scoring systems vary from one lender to another, characteristics usually examined include your income, which measures your ability to repay, and your credit history, which indicates your willingness to repay. Your credit history is a record of debt such as charge accounts at department stores, installment loans, credit card accounts, and mortgage payments. Lenders believe how debt has been handled in the past is an indication of how your credit obligations will be handled in the future. While many consumers prefer to operate on a "pay as you go" system, cash transactions do not count towards establishing your credit history.

Other factors that lenders look for are residence, employment record, current assets, and legal age (in Minnesota is age 18) to obtain credit. Owning versus renting your home, the number of years you have been at your residence, and how long you have been employed at your job are viewed as measures of your stability and count towards your total credit score. Debt outstanding is also considered; for example, a substantial amount of outstanding debt could affect your ability to repay a new obligation.

Under the Equal Credit Opportunity Act, credit cannot be denied because of age, sex, marital status, race, color, religion, or national origin. However, it does not guarantee that you will receive credit; you still must show that you are creditworthy.