Credit Score 101

If you’re new to the world of finance, you’ll be surprised to know that there’s so much more involved in financing your dreams. Getting a home loan, a car loan, a credit card, and even a job all requires a good credit score.

A credit score is your passage to these things and more. Through it, lenders, credit card providers, and prospective employers determine whether you’re a potentially good debtor or a deadbeat person whose traits will most likely affect good performance at work and timely payments on debt.

A credit score is earned by basing it on your credit history. Depending on the data listed on it, you are scored accordingly. Your credit history comprises of debts you have accumulated in forms of current and old loans, credit card charges, payday loans, and so forth. It also has your previous and current employment information, all the residences you have lived in, your phone bills, utility bills, insurance, and rent.

To get a good credit score, your credit history has to contain on time payments and fully paid bills on loans. Your credit card charges should have been paid on time and in full in the shortest span of time possible or longer. The same goes for your other fixed and fluctuating bills. Your insurance must be paid on time and your rent and utilities, too.

However, when your credit history contains the opposite of these, you’ll most likely be branded with a bad credit score. This is the inevitable result of having a large debt, late payments and defaults. Whether you’re a day late or for months, it will reflect badly on your credit history. If you think years old unpaid debt won’t affect your score any longer, you’re wrong. Your credit history cycles every seven years. That’s long enough time for all of your past debts to be included on your current credit score.

Having a good credit score will land you the best rates on loans, insurance, and credit cards. It will get you approved without fuss on phone plans, rent, and even a job. On the other hand, if you have a bad credit score, expect higher interest rates on loans and credit cards. Your insurance premiums won’t be as pretty, too. In terms of jobs, the ones with a smooth financial standing will most likely get the position. Unless you nailed your interview and impress your employer at best, then maybe, you could land that job despite your bad credit.

So always keep in mind to keep your credit history clean. Good credit score will bring you good financing.