A credit score is a tricky little concept, and most people don’t know many details about it. You know that your credit score is important, but that might be all that you know about it. To be honest, that’s the most important thing to know about credit, and the second thing is the higher your credit it, the better for you.
But before knowing how to improve your credit, you must understand what credit shows and why it is important.
Your credit history details all of your financial decisions starting from your first bank account to the present and shows everything from your accounts and credit cards to the loans that you have taken out and how you faithfully you have been paying them and your credit cards off.
Your history basically shows how responsible you have been with your money. And especially highlighted are the times that you were delinquent on a payment; either you made a loan payment late or didn’t pay at all.
Your credit score takes your credit history and simplifies it into one number (or three numbers for each of the different credit bureaus) for anyone who needs to make a quick decision based on your credit history. This score is a nice and concise way of telling how good of a financial candidate you are based on your financial history.
People look at your credit score when determining if you are a good candidate for things that require a long term payment or repayment plan such as signing a lease for an apartment or getting a loan like a mortgage. The higher your credit score, the more likely you are to get that apartment or loan and if you do get that loan, you will get a better interest rate with a higher credit score.
It is in your best interest to have a good credit score, but how do you get there?
Well the first thing you should do is to get a credit card. Having, using, and paying off a credit card shows whoever is looking that you can manage your money. Basically, using your credit card responsibly says that you make more than you spend (hopefully), which is important to anyone that you could be borrowing money from.
The next thing you could do to improve your credit is take out a small loan and repay it in installments. Be sure to make your payments on time and never pay late. Late payments are expensive and also look very bad.
Once you have continued to fully pay off your credit card balance every month and make payments to repay your loan on time, you will build your credit high enough to qualify for lower interest rates than you would otherwise. These low interest rates will end up saving you thousands or even hundreds of thousands of dollars throughout your lifetime.
This was brought to you by FastLoanTree.
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