A Healthy Credit Score

A credit score is a 3 digit number (typically between 300 and 900) that indicates the overall health of a persons’ credit and their ability to repay debt. Information from a credit report, which is a summary of a persons’ financial and credit history, is used to calculate the actual number. The higher the score the better the credit rating.

Credit Unions, Banks and other lenders use a credit score when deciding to approve a loan application, the amount of money to loan and the interest rate they will charge.

Most people at some point in their lives will need to borrow money to make a major purchase, such as a home or a car. Rather than having to hand over all of the money up front, the use of credit spreads the burden of the cost over a longer period of time.

7 Easy Steps to Maintain a Good Credit Score

  1. Adhere to the terms of your credit agreement by making your payments on time.
  2. Don’t miss payments.
  3. Do not exceed pre-authorized limits.
  4. Keep your credit balances as low as possible. The higher your balance is in relation to your credit limit, the worse your credit score will be.
  5. Manage your debt. Having too much debt will negatively impact your credit score.
  6. Restrict the number of new credit applications you make. Every time you apply for credit, the lender makes a credit inquiry resulting in a lower credit score.
  7. Be aware of your creditworthiness. If you don’t know your credit score request a free Credit Report. Ensure the information is accurate, and if you note an error in your credit report, dispute the mistake with the Credit Bureau. Credit Reporting Agency’s must investigate a disputed items.

Building and maintain a good credit score will have a dramatic impact on your financial life. Although you may still be approved for a loan or credit card with a low credit score, the interest rate charged could be significantly higher, costing more money in the long run.