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Why Credit Is Important

4 min read

Last Updated: March 14, 2025

Table of contents

Key Takeaways

Your credit score can determine whether you qualify for a credit card or loan.
Landlords and employers may look at your credit history.
Credit cards have fraud protections not found on most debit cards and may allow you to earn rewards when you spend.

No matter how good you may be with money, a lender can’t see your budgeting strategy or emergency savings fund. But a new creditor will most likely see your credit report.

Your credit history plays a big part in everything from applying for an apartment to getting a mortgage. That's why it's so important to build credit and manage it responsibly.

What is credit and why is it so important?

Your credit report is a document created by a credit bureau that gives a summary of your credit history. It shows how much money you've borrowed and when, the type of credit accounts you have, if you've made payments on time, and more. In short: your credit history shows if you’ve been responsible with the money you've borrowed (your creditworthiness).

If you don’t have a credit history yet, or if you're building credit, a secured credit card might get you started. A secured credit card, like the Discover it^® Secured Credit Card, can help you build your credit with responsible use.¹

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Why is it important to have a good credit score?

Your credit score shows lenders how likely you are to pay them back. Poor credit is typically anything below 580, while exceptional credit scores are generally 800 and above.

You can earn a good credit score with habits like paying your bills on time and maintaining a low credit usage.

On the other hand, poor credit history comes from missing payments or using too much of your available credit (your credit utilization ratio).

It’s worth it to take steps to help improve your credit. There are many situations where a good credit history can come in handy.

Credit can make it easier to apply for housing

Your credit report will show your payment history. Are you responsible with paying bills on time? It’s an important trait to a landlord who’s expecting a monthly rental payment. This can be particularly important in a competitive housing market.

Credit can help you secure loans

Whether it’s a home loan, auto loan, or personal loan, your credit can be one factor in determining how much of a risk you are to the lender. A potential creditor needs to know how likely you are to pay them back.

A good credit score can qualify you for lower interest

Your credit score is an important factor in the interest rate you qualify for. Your interest rate affects how much you’ll pay over the life of the loan. For example, lenders consider someone with a good credit score less risky to lend to, so higher credit scores tend to come with lower interest rates.

The reverse is also true. When you have a low credit score, a lender may charge a higher interest rate to offset the risk.

Certain contracts require credit

Are you planning to pay in cash for a new phone? You may still need a credit check when signing up for a new phone plan or service contract. The mobile service provider wants to make sure you’ll pay your cell phone bill on time.

Additionally, when it comes to renting a car, you may need to use a credit card as payment, rather than a debit card or cash. There are some exceptions, but car rental companies do this to make sure that there are enough funds available in case the car gets damaged or you fail to return the car.

Some jobs may require credit checks

While a potential employer can’t see your credit score, they can see the information that contributes to your credit score. This includes your credit card debt and repayment history.

You’ll receive a notification that an employer wants to run a background check and they must have your written permission to do so, according to the Equal Employment Opportunity Commission. You have the option to deny the request, but having good credit may be important for getting the job.

Credit cards may help with some types of fraud

The Fair Credit Billing Act protects credit card users from unauthorized charges. You need to notify your credit card company and their investigation needs to find that the purchases were fraudulent. Under this act, consumers aren’t responsible for more than the first $50 of charges if the credit card issuer finds fraud.

Did you know?

Discover has a $0 Fraud Liability Guarantee. You’re never responsible for unauthorized purchases on your Discover Card.²

Learn More About Discover Card Benefits

Credit cards let you earn rewards

Depending on the cash back rewards card, you can earn cash back on your everyday purchases. For example, Discover credit cards earn rewards on every purchase. Learn more about Discover rewards credit cards to find the best rewards card for you.

The bottom line

Your lender reports your credit utilization once a month to the credit bureaus. You’ll need several months of responsible credit card usage to establish a credit history. Credit of all forms can not only help you build good financial habits for the future, but a solid credit history can be an important tool to help you accomplish whatever goals you may have.

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