Creditors Keep Score
Have a bank account, a credit card, a car payment, a rent payment? Then you have a Credit Score.
Credit Scores are based on statistical analysis of your credit files. That means if you pay your bills and debts on time, both interest and principle, then you are considered a good credit risk. Lenders use credit scores to determine who qualifies for a loan, at what interest rate and with what credit limits.
Simply put, someone is keeping track of if and when you pay your bills. And if you fail to meet your financial obligation to creditors, it can literally impact you for years to come.
When people fail to make timely payments lenders are hesitant to give loans to high-risk borrowers. It makes owning a home, buying a car, getting any kind of loan...seriously costly and often impossible.
The good news is that building good credit is pretty easy: Pay what you owe when you owe it. It’s the right way to score big points.