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Hey Queenie... with the costume challenges you basically have to put together an outfit with items from the current theme the challenge is in and then switch out some items with your own like the hair, a shirt, a skirt. You can add more items from the current theme to increase the score you get at the end. You will see a max bar underneath the outfit challenge requirements.
The goal of the challenge is to create an outfit that other players will vote for. So if you create a super duper looking outfit you stand a good chance of getting votes and ending with a high score. The higher the score the more gems and maybe even YC you can win.