What is a credit score and why is it important?
A credit score is a numerical value that essentially represents an individual’s ability to handle borrowed money. Banks, employers, insurers, and rental property owners are some examples of organizations that are likely to check a person’s credit history in order to estimate risk before going into business with them. The reason for understanding your credit score is so important is because of the opportunities that are associated with having “good” credit. There are numerous advantages to having a “good” credit score such as the ability to be approved for credit cards, higher credit card limits, loans, rental houses, apartments, better insurance rates, and better interest rates. The credit score range is from 300-850 with the larger the score the greater the trust.
What score is considered “good”?
How do I start building my credit score?
Without having previous credit history lenders don’t have any information on whether an individual is a risky investment or not. For this reason, lenders will not do business with someone that is lacking a credit score, but there is a safe alternative that allows someone to prove their ability to manage borrowed money and gain the desired trust. A secured credit card is a safe alternative that beginners can use to start building their credit. The secured credit card which can be attained at almost any bank or credit union with zero prior credit history is unique because the individual will tie up their own money as collateral in case they fail to pay the card off on time. This eliminates the risk for the bank but still allows the individual to build their credit. Using the card monthly, never exciting 30% of the total available funds, and paying off debt punctually for 6 months will result in the formation of a credit score. Once this foundation is built the secured card can be transformed into a regular credit line and the money that was tied up originally will be returned.