Have you ever paid for your credit score and then stared at that magic little number wondering what on earth it meant? It's a good question to ask, and here's a quick breakdown of what it is, and why it's important.
Let's start with why your credit score is important.
Your credit score is a starting point for all sorts of areas in your life.
If you're applying for a loan of sorts, the higher your credit score, the more likely you'll receive the loan, and the more likely you'll get a low interest rate on it.
Conversely, if your score is low, it's less likely you'll receive the loan, or get a good interest rate on it.
But loans are just the beginning.
Did you know that landlords and employers can also look at your credit rating? They're doing so to get an idea of how financially responsible you are.
Now that you know why a credit rating is important, let's talk about what all goes into that number.
First off, your credit score number is arrived at using a complex mathematical equation.
This equation factors in several different financial areas: your payment history (whether or not you've paid bills on time, have missed payments, etc), what you currently owe, how much new credit you have, the length of your credit history and so on.
To keep your credit rating high, follow these simple tips.
Stay on top of all your bills and loan payments.
Make these payments on time, every time.
Try to use only about 25% of your available credit, and whatever you do, stay far away from maxing out your credit cards.
Open a checking and savings account with a local bank, and keep it open for as long as possible - years, and years if you can.
Lastly, be smart about your budget.
Stay within your means at all times and you'll be well on your way to financial success.