Credit is a big deal and don’t let anyone tell you differently. Your credit is your financial identity. It tells lenders who you are from a financial standpoint. Excellent credit can be the difference between paying a small amount of interest to obscene amounts of money. Maybe you have already experienced a situation where you ran your credit and didn’t get approved because of your lack of credit or your inability to have access to credit cards, because no one will approve you since you don’t have any credit history. Before I get into some solutions how does building credit work? What does this process look like?

Credit scores can range from 300 to 850. 300 being terrible and 850 being the very best. There are 3 major credit bureaus. Equifax, Trans Union, and Experian. These credit bureaus keep track of your credit history – in terms of late payments, on time payments, age of your credit, how often you run credit and more. What does this mean to you? Let’s say you get a loan for 10k to buy a used car. You now owe 10k to the company who loaned you the money. Based on the terms of that loan you will pay $200 a month over the course of 3 years with interest to pay off the loan. For every month your payment is on time the financial institution will report your payment to the credit bureaus saying this person has made a successful payment to the loan on time as agreed. As time progresses, with each on time payment your credit score will increase. When you apply for credit products the financial institution is assessing your relationship with them and your financial identity. When the credit application has been processed, they are looking to see your credit worthiness. Does this person pay their debts? The higher your score the more the bank will trust you and they will become more willing to lend to you. The lower your score the least likely people will lend to you because of the risk they fear you will not pay them back.

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