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Credit Score: What is it?

By Janet Lacey
Published: Sunday, November 15th, 2009

You must have heard this term many times before. Even a common man talks about it with ease today. In fact, a talk on credit scores tends to draw crowds since many people have many experiences to share, the pleasant and the horrific. The recession, the financial crisis, the increasing need to make money, the desire in everyone to be the richest are all adding to talks on credit scores, how you build them, how you maintain them, where the pitfalls lie and many more. The focus has shifted from just earning enough money to maintaining it wisely. This change in trend can influence your decisions in matters of money. You may end up even making wrong decisions if you are not well aware of the pros and cons.

If you are thinking you could escape from the clutches of credit score, you will be mistaken. The smallest of transactions is sure to show up in our credit scores. Credit card had become an inseparable component of our lives. It has moved to being a necessity from the status symbol that it was considered to be. Hence it is very necessary for us to be aware of credit scores and how they impact our life.

Financial institutions give immense importance to the credit score. To them, your maintaining a good credit score signifies that you are aware of how to handle money. Having too low or too high scores could show your negligence or ignorance on money matters. If you are one of those who have successfully maintained a good credit score, you will be surprised at the speed at which your request of loans will be honored. There is a certain level of trust the banks have in you because of the healthy credit scores.

One way to manage your credit scored well would be to know in detail about them. There are a number of benefits of having a good credit score. Banks will treat you as privileged customers, which means you may be offered some special services at very subsidized rates. Also, the banks will offer loans at low rates to such customers. All it takes is enough knowledge so that the credit scores do not panic you or let you get carried away. Though many start off wisely, at a certain point, they tend to get carried away with the use of their credit cards. This could make life a nightmare in no time.

Being aware of the facts on usage of credit card and advantage of a good credit score, you may now be able to make wiser decisions when it comes to money matters. In today’s world, money brings a sense of security. The steep rises and falls in the market will not affect us adversely to a great extent if we are able to modify our expenditures based on the trend. There is no one rule to using money well; you only have to be smart in making your day to day choices to reap the benefits.

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