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You hear the word almost every day, in commercials, at stores, and anything surrounding personal finances: Credit. All of us know about the well-known credit card companies (Visa, MasterCard, Discover), credit score commercials, and the infamous FICO score. How can we be surrounded by a word so much… and not know exactly what it means?! Don’t worry, you’re not alone. Credit scores, reports, and basics are easy to understand once you take the time to read about it! Credit follows us throughout life so it’s important we take it seriously and can do whatever we can to continue to better it!
Credit is the ability to borrow money or access goods or services with the understanding that you will pay it back later. Creditors grant credit based on their confidence that you can be trusted to pay it back along with additional fees. Good credit means another party looking to trust you, can. Bad credit means that maybe you aren’t AS responsible as you should be, and in turn, extra precautions may need to be taken!
Credit scores allow these creditors and lenders to understand the level of trust and help decipher rates. This includes car loans rates and interest, mortgages rates, ability to rent or buy, utility costs and rates, and insurance rates! Building credit takes time, but it’s all about starting proactively rather than reactively.
I. Pay Your Bills on Time
II. Don’t Overspend / Max Out Credit Cards
III. Continue to pay off debt and loans
IV. Request a credit line increase once you can consistently pay off more at a time.
V. Continue budgeting and saving so you can be financially smart and aware of your spending!
It’s always a good idea to keep your debt low, but if it’s not possible, just make sure you are using resources to help you budget and save. Being responsible, not overspending, and staying on top of payments is the best thing you can do. Let’s talk about some resources you can use to help yourself move forward:
If you are looking to increase your credit score, introduce credit to a teenager/young adult or want to just better take control of your credit, budget, and saving, make sure to check out the hyperlinked words & share with others!
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