Credit SCORE

What is credit score? Credit score is a number value that is associated with your name and financial history. Your credit score is a value associated with your personal credit history. The value is representative

of your probability of paying back your debt. Credit score, however, does not begin until you take out a loan or open up a new credit card for at least six months. With that being said the strength of your credit score is important in the financial world. Although, if you have a surplus of cash and simply use a bank account connected to a PayPal account or a similar method you may not need to worry about credit score at all. However, if you plan on making use of strategic low-interest loans or need a credit card to have a smoother online and in store shopping experience, credit score is definitely important to you.

Having understood what a credit score is, it is key to understand the importance and determinants of your credit score. The underlying importance of a credit score is the fact that credit score is a strong determining factor to whether lenders will loan you money or not. The lower your credit score, the less likely you are to receive loans or be approved for a credit card. With that being said a high credit score does put you in better standing but does not guarantee you will receive a loan or not. A strong credit score would be essential if you plan on taking out a loan to start a new business or to purchase a home. As you pay back your loan from the bank or a loan company, your credit score is affected. This is because the determining factors for your credit score are your net total debt, age of your financial accounts, the types of those accounts, and if applicable the number of late payments. In addition to these factors another important factor of credit score is the time at which your credit score was added up. As you make payments back on your loan on time you will see a general improvement of the score; as it shows you are trustworthy and capable of returning money you have borrowed.

In addition to credit score being the gateway to loans, credit score is also important in registering for credit card(s). Credit cards are like magical pieces of plastic that allow you to purchase whatever you please up to a certain spending limit set by your bank. -- That being said, this spending limit set by your bank is determined by your yearly salary and credit score.-- Although it feels exhilarating to purchase whatever you like, you end up paying for what you purchase on a monthly basis or monthly cycle. In order to have such free spending abilities one must have a trustworthy credit score. An unfortunate reality for a sizeable amount of people is that they often fall into the trap of credit card companies and ruin their credit by amassing debt they cannot pay off in time. It is paramount to avoid such a trap early on into your credit history.

Now that you understand what credit score is, the importance of this value, and its determinants, make sure to purchase only what you can afford and avoid the pitfalls of amassing insurmountable debt.