Even if you do not yet have a “credit score,” you will at some point in your future, so it’s a good idea to understand what a “credit score” is, and its importance. Everything from renting an apartment or buying a home to purchasing a car and auto insurance to applying for a job can involve having your credit score reviewed.
A “credit score” is a pretty simple concept. It is intended to “score” your ability to, and likelihood of, repaying a loan. The total amount of debt you owe to any organization, the length of time you’ve been borrowing money in your life, your payment history, the number of loan accounts you have open and have recently opened, and the percentage of your allowed credit being used all plays into a score that ranges from 300 to 850. The higher your score, the better your credit rating, which in turn enables you to qualify for loans at better interest rates.
If you don’t yet have a credit report, be sure to build one slowly over time. Applying for many credit cards or loans within a short amount of time will negatively affect your score. There are various ways to obtain credit for the first time, including secured credit cards, where you set funds aside in a savings account to secure your credit card payments.
Even if you think you don’t yet have a score, it is still a good idea to check on a regular basis, since this of the best ways to catch identity theft in its early stages.
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