Credit Matters

Page 1

August 2012

Credit Matters What is a Credit Score? A credit score is a number that strongly indicates to lenders and creditors how likely you are to pay back the debt you owe based on your past borrowing behavior. The higher your score, the more likely you are, in their eyes, to pay back the money you borrow. Why is good Credit Important? Your credit score is used to determine whether you can get credit for things like: a credit card, a loan to finance your college tuition, a loan to buy a house or car, or even to start up a new business. Home ownership and financial security is an important part of using credit wisely. Your credit tells a story to lenders about your ability to maintain and honor financial obligations. Therefore, it is important that you have a good understanding about obtaining and maintaining credit. It is important to lenders how you handle past borrowers. Your credit is based on how you paid bills in the past. If you have bad credit it tells a lender that you don’t pay on time or not at all. Poor credit may also be an indicator that you may have consumer fault. Good credit is important for getting people to lend you money, but it is also just as important to get the best rates. When you want to borrow money for a car, creditors make their decision based on a number of factors, but the most important is credit history. People with good to excellent credit get lower interest rates. Remember anyone can have good credit. It is not just for the wealthy. Keep in mind that some wealthy people can have poor credit. Insurance companies will check your credit when you apply for specific policies. Credit is a privilege, not a right. If you want to borrow money you must protect it.


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