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How Important Is Your Credit To You

When we think of credit, sometimes we don’t realize how important it is to our everyday life. Your credit will affect what jobs you can get, how your interest rate will be, even how much your bills will be. So what exactly is credit?  Credit is the ability of a customer to obtain goods or services before payment based on the trust that payment will be made in the future.

Some may even say that credit is more valuable than cash. Teaching the importance of credit to kids at an early age is very vital. Also, there are even ways that someone can build a good credit score before their child graduates college. This will give that child an advantage on getting a house, car, job, or loan to start a business.

Credit score range from 300 being the worst to 800 being the best. An estimated 60% of people range from a credit score of 650 to 799.  Here is what makes up your credit score?

One way that you can improve your credit is to always pay off you balance in full. Also if you want to build your child’s credit up, you can add them as an authorized user. An authorized user is someone who is put on a credit cardholder’s account but is not responsible for repayment of the debt. Just because someone is an authorized user doesn’t mean they will have excess to your personal credit card. Make sure to check with your card provider about every detail regarding what an authorized user has access to. This can be done not only for you child but for someone who needs help improving their credit. The cardholder can also negatively affect the authorized user if he or she is not making payments or has late payments. So again make sure that the card provider gives all the details that is important good and bad.

As stated early your credit affects your interest rate APR (Annual Percentage Rate) this is based on the risk you pose. The higher the risk the higher the APR. Banks base everything on what risk someone has based on their credit score. For example, someone with a 660 to 679 credit has odds of 38 to 1 of having a late payment. Other example is 500 to 600 credit score has odds of 8 to 1 of having a late payment. This is how banks come up with what a person’s interest rate will become. The higher the credit score the lower the APR and the lower the credit score the higher the APR.

Credit is like a trail that everyone leaves it could be a small trail or a big pile. Always keep track of what is in your name and any debt that is owned pay it off or try to make payment arrangements.   You also can check your credit score free at www.annualcreditreport.com .

 

Reference: Credit IS King by: Will Roundtree