"Sorry, we won't be able to help you today." One of the worst things you can hear when making a large purchase such as a car, home or gift for a loved one. It can be just as embarrassing as having your card declined while shopping. Have you ever been declined when applying for credit? Well, I have and it is not the best feeling in the world. Like many others, while in university, my credit score took a beating, simply because I did not understand the importance of credit and what really impacted it. After bettering my knowledge on this issue many people face, my credit score has improved dramatically, and it continues to climb. I learned a few tips from some industry experts and started applying them. I was able to purchase a beautiful home, new vehicle, manage several credit cards and was even approved for a large unsecured loan. By following these simple tips you, too, will have a greater chance of repairing your damaged credit. What is credit and why is it important in life? I will explain it to you in simple terms. Your credit score is used by a bank as a way of determining how accountable you are at paying back money that you owe. The lower the credit score the less accountable and less likely the bank will lend you money and vice-versa. That is why it is so important in life. Now, let's dig a little deeper. When you start out, your credit score is nonexistent. The only way to build your credit is to start borrowing money from the bank. One of the most common ways to do this is to get a credit card from your bank, hence the name!Start off small with your first credit card, but always make your payments. Missing a payment or being late on a payment is a strike against you and more importantly your credit score. This leads into the first factor that determines your credit score, payment history.

Payment History

The credit bureau keeps track of everything, such as; credit cards, auto loans and personal lines of credit, just to name a few. Every time a payment is made to these accounts it has a small positive influence on your score. Let's say you made 10 consecutive payments in a row, but you didn't make your payment on the 11th. Perhaps you could not afford it or maybe you just forgot. No matter what the reason, this is going to have a negative impact on your score. Some banks give you a grace period to make the payment, but once that passes, you are in trouble.Remember that phone bill or that utility bill you didn't think you had to pay? It just went to collections and now you have an even larger negative strike against you.The biggest mistake you can do to your credit is declaring bankruptcy. This step should only be taken if it is completely necessary. Declaring bankruptcy is no joke and should not be used lightly.

Lesson #1: On time payments = GOOD
Tip #1: Only borrow what you can repay and spend what you can afford.

Credit Utilization

Credit Utilizat... Oops, I forgot we were trying to keep it simple. Pay down your credit cards and try to keep the balance owing low. Most young adults typically receive their first credit card after high school and many tend to rack it up if not max it out. Remember when you received yours in the mail? I do, and I was one of those "young adults," who decided it would be a great idea to spend it all. Well, I quickly learned that doing that wasn't a great idea. It turns out, it wasn't free money and I actually had to pay it back. This goes the same for lines of credit and personal loans as well. If you have large amounts owing, your credit score is going to reflect it.

Lesson #2: Pay down your credit cards, lines of credit and personal loans.
Tip #2: Try to make more than the minimum payment. The quicker you can pay off your loans, the better your credit will be.

Length of Credit History

Building credit takes time, so start sooner than later. The length of your credit history is important, especially if you have a great history of paying your debts on time. If it is filled with late or missed payments, you might find yourself with a big disadvantage if you plan on applying for additional credit.

Lesson #3: Start building your credit history as soon as possible.
Tip #3: Start one now by applying for a credit card, if you do not have one already.

New Credit

Applying for a bunch of new credit can be scary in the eyes of your bankers. This usually means you are preparing to take on additional debt or you are having money problems. If you are planning on making a large purchase by applying for a large loan, for example, a new truck. It would be best to not apply for a bunch of other credit prior to this purchase. It may flag you as a higher risk to them, which in turn, may not get you the loan. Another mistake some people make is applying at different places, even after you were declined at your first option. This can be damaging to your credit, so if you have been declined, it may be best to wait a little while before trying again. The safe time to wait is about 6 months.

Lesson #4: Only apply for new credit when you need it, and if you are declined wait a while before trying again.
Tip #4: Don't take on any additional debts immediately before a large purchase, whether it be a new vehicle or a new home.

Types of Credit in Use

The last thing your credit score is based off is the different types of credit in use. Credit cards, personal loans, car loans and mortgages are a few different types of credit. By having a mixture and good credit history of paying them all, you will have a better chance of getting approved next time you go to apply for new credit.

Lesson #5: A mixture of different types of credit has a positive impact on your credit.
Tip #5: Don't attempt to take on additional loans just to improve the number of different accounts. Open them when you need them.