What is a Credit Score?
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 examples of organizations that are likely to check a person’s credit history to estimate risk before going into business with them.
The reason understanding your score is so important is because of the opportunities that are associated with having “good” credit. In addition, there are numerous advantages to having a “good” 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. However, the credit score range is from 300-850, with the larger the score, the greater the trust.
What Score is Considered “Good”
How to Start Building a Credit Score
Without having a 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 lacking a 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. You can attain a secured credit card at almost any bank or credit union with zero prior credit history. This type of card is unique because the individual will tie up their own money as collateral. Therefore, if they fail to pay the card off on time, they have a safety net. 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 creation of a score.
Once this foundation is built, you can transform the secured card into a regular credit line, and the money that was tied up originally will be returned. This is a great way to start building your credit and increasing your financial opportunities.