subject: The Importance of Having A Good Credit Score [print this page] In the United States, a higher credit score means more opportunity. It is can sometimes be difficult to obtain and maintain high credit scores. However, having a high score is a sign that you're financial responsible and meet your payment obligations in a timely manner. More so, having a good credit score indicates you're a good risk to potential lenders. So it is important to try to maintain a high score or to improve on your score if it is too low.
A credit score is basically your credit reputation. Who doesn't want a good reputation? If you want to see an "approved" mark on your credit application sheet, then you must avoid the following:
1. No Credit History
Many people say having no credit is worse than having bad credit. While that isn't the case, without a longer credit history your score will suffer. As a result of the lower score lenders are often discouraged because they don't have access to a credit history on which to base a lending decision. While you can still be approved, institutions are more likely to deny your application.
Lending institutions use credit scores to quickly judge your creditworthiness. Unfortunately, if you haven't established a credit history, your credit score will be lower. Also, because of a lack of history, lenders may be reluctant about extending you credit.
2. Low credit scores.
The average credit score in the United States is between 580 and 650. There are major institutions called credit reporting agencies in the US that determine if you are suitable to be given credit. Equifax, Trans Union and Experian are the three biggest credit reporting agencies. Your credit score is calculated using data found in your credit report at each agency. Your score will vary because there are usually minor differences in information available from one agency to the next.
If your credit score isn't above the standard score, you'll more than likely be denied credit. The key is to use your credit responsibly. Don't be immature. Don't take on more credit than you can afford. Always pay more than your minimum payment for credit card debt. Credit is very useful when used correctly. A credit card can come in handy during an emergency. Receiving lower interest rates on a home or car loan can save you hundreds to thousands of dollars. Use credit wisely and your credit score will improve.
