Your Credit Score - It Matters

Your Credit Score - It Matters

Your Credit Score - It Matters

Let's face it, whether we like it or not, credit has become a major component within our economic structure. It provides the basis by which lenders can determine who they can extend a line of credit to without dealing with debts of their own that have been known to bankrupt financial institutions.

Created more than one hundred years ago, credit reporting has allowed many companies to track the debt habits of spenders so that they can safeguard themselves from people who habitually default on loans. Because of this, it is virtually impossible for you to obtain a good deal on a line or credit (or credit at all for that matter) if you have a low credit score or little credit history.

Over time, it was found that a fair credit scoring system needed to be established so that a solid basis of comparison could be formed. In 1989, such a system was developed that creates a summary of consumer history, which is now known as "FICO". Widely used today, this system allows lenders to review certain factors that play a role in how they determine your credit worthiness. These factors include outstanding debt, payment history, recent inquiries, length of credit history, and types of credit used.

Your credit score matters because, these factors combined, are the ultimate driving force behind whether or not you will be approved for a number of things; including necessities like housing and transportation. In addition, consumers can see a significant amount in savings with a good credit score because the better your score, the better chance you have of being offered the lowest interest rates available.

Ultimately, it is best to think in terms of a lender. If you are loaning someone money, you would want assurance that the person you are lending to is responsible and will pay you back. If you have total assurance that the person will pay you back, you are more likely to help that person. Your credit score serves the same principle with financial institutions.

Always make it a point to monitor your credit score and shoot for the best possible rating you can receive. Then, you won't have to deal with the hassle of constantly paying high interest rates that can drag out paying off a debt for years on end. The better your credit, the better off you will be in the end.

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