How likely you are to repay money that you borrow - this is what your credit score indicates.
However, your credit score determines much more than your ability to take out a loan and the interest rate you will pay. Insurance companies, landlords, and even prospective employers may view your credit score before making decisions.
Credit includes educational loans, car loans, personal loans, mortgages, and credit cards.
A complex mathematical formula determines your credit score. It is based on your credit payment history, the total you owe, how long you have used credit, your amount of new credit, and type of credit.
There are a few basic strategies to follow to increase your credit score: pay all of your bills on time, use credit to purchase things sometimes but not always, avoid opening more than two credit card accounts (no matter how nice the introductory offer), and avoid bills going to collections.
Once per year, use AnnualCreditReport.com to view your credit report for free. Make sure that all of the credit accounts listed on the report are accurate. If something looks unfamiliar, report it to your lender immediately, as you may be a victim of identity theft.
Check out EducationCents.org for even more great information.
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This is super helpful Troy. Understanding financials has always been a major struggle of mine, but I have made a conscious effort to stay informed on this topic. It seems so appealing when there is no interest for the first 12 months, but then later down the road you find youself in debt. It is hard to establish credit without getting yourself into trouble, but I am learning.
ReplyDeleteAllison