Imagine you want to borrow money to buy a car. You have the money and the right job to pay the loan back on time. But you haven't been approved for the loan yet, even if you have the right job and enough money. You'll be left wondering why.
In the U.S., having a lot of money and a high salary are not everything. You need to think about something important that will have a big effect on your daily life. Creditors, like banks and credit card companies, use this important thing to figure out if you are likely to pay back what you owe them. The credit score or credit rating is this important thing.
If you haven't paid your bills or loans on time in the past, your credit score is likely to be low. Whether or not you get a high credit score depends on everything in your credit history. This is why it's important to pay your bills and loans on time so that the people who gave you money don't put a bad mark on your credit report.
For example, if it took you a long time to pay your credit card bills, the credit card company will send a report to credit reporting agencies saying that you haven't been paying your bills on time or that you still owe money to their company. Your credit score will go down as a result.
You need to realise that credit scores are very important in the modern world. Even phone companies look at a potential customer's credit score to see if they are likely to pay their monthly phone bills. If you have bad credit, it can be hard to do even simple things like get a phone line put in your house.
Lenders, like banks and credit card companies, also look at your credit score to decide if they will give you a loan or credit card. If your credit score is high, you will be able to get a lot of credit. When applying for a low-interest credit card or loan, it is much easier for people with a high credit score. This is because their creditors know they will probably pay back their debts on time.
Fair Isaac Corporation, or FICO, is the company that most people use to figure out their credit score. The score can be between 300 and 850. The better your credit score, the easier it will be for you to get loans and credit cards with low interest rates. In the United States, a FICO score of 725.660 is a cutoff for creditworthiness. This number on your credit score is just the beginning of what you need to do to become creditworthy.
You should pay off all your debts on time if you want to get higher scores. This means that you have to pay off any loans or bills you have lying around your house if you want your credit score to go up. If you don't, your credit score will continue to go down, and you'll end up with much more debt.
Always keep in mind that you must have a good credit score. If your credit score is 725, you are well on your way to being a good credit risk. Raise your score and you'll be able to get the best deals on loans and credit cards.
