Far too few people know about something that has a huge impact on their life—their credit rating. They often learn about it after it is too late and pay dearly for it. You see you start forming your score as soon as you become a regular consumer which for a lot of people is during High School and for most is at least by the time they enter college. The problem is that they don’t know what this mysterious entity is all about and make decisions that they rue financially. It really is a shame that more of this financial mumbo jumbo isn’t taught to people in high school. The problem is it is not just a problem of young people and so their teachers might not have the foggiest either.
So what is a credit rating? Well it is a number that is used by potentially important people in everyone’s life. It is used by banks, by credit card companies, by mortgage lenders, by landlords, and be virtually everyone else who can stand to benefit from associating themselves with financially responsible people. So it is a number that attempts to evaluate how well you use your money. Unfortunately there are things that can do that don’t necessarily reflect on your level of responsibility fiscally but that will ruin your score.
For instance applying for too many credit opportunities (i.e. to take advantage of the 10% discount that you get on a purchase for doing so, or to get a free t shirt in college – totally not worth it!). Another thing that will kill a credit score is being late on anything. You can just do it once and take a big hit in your score and many people just don’t understand the kind of effect it will have on their credit rating. Another thing is disputed charges. Often a person will be wrongly charged for something or have other disputes about a fee and won’t end up paying. Often the amount of money in question is not worth the damage that it will do to the credit score and the resulting extra costs that this incurs.
So what are the benefits of having an excellent credit rating? Well people are more willing to lend you money and on better terms (i.e. lower interest rates, cash back deals, interest free periods, etc.) You are also looked upon more favorably by landlords and other essential service providers. You get better deals on insurance, better interest rates on home mortgages, car loans, and on and on.
Take my advice and be very aware of your credit rating and work to improve it. Pay your bills on time all the time! Get your score frequently and make sure that it contains no errors. Borrow only when necessary and in amounts that fit your need. Keep track of your spending and spend within your ability. Don’t use credit cards unless you are going to pay off the balance each month.
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