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What is a credit score?

By Janet Lacey
Published: Saturday, October 24th, 2009

All of us have heard at least one or more times in our life. The word credit score can be heard echoing pretty much everywhere we look thanks to the recent financial crisis that is yet to pass completely. In fact, the financial crisis has actually bought more emphasis on the factor of credit score, which was otherwise not particularly important to many individuals’ across the country. But now, we need to watch how we spend our money and consequently, it has become important to ensure that we don’t mismanage our funds that could then land us in trouble.

The first thing that you need to keep in mind is that everything you do with your money has come sort of effect on your credit score. This varies from paying your bills to buying something with your credit card. No matter what the transaction may be, it is going to reflect on your credit score. This holds especially if there is a transfer of money, either from your bank account or to your bank account. Hence, no one can escape from the clutches of the credit score and it is important to understand that you need to maintain it in good stead.

To put it in short, the credit score is more or less the representation of a person’s financial status. Using this one number, financial institutions can get to know how you are with money and whether or not you can be approved for a loan at a good rate of interest. Hence, it is important to understand that credit scores are not something that should be taken lightly. With a poor score, you might have a tough time trying to get funds for any of your endeavors, be it buying a car or investing in real estate. A good score is vital to survive today, especially considering the kind of crisis we are in now.

On the other hand, there are a number of advantages of having a good score, which vary from lowered rate of interests to preferential treatment and approval. Having a good score is imperative to ensure that you succeed in life. Additionally, it is also valuable to be in the know about these things before they take a turn for the worse as many people who ignored these factors ended up paying the price and cost them dearly to rebuild their score again from scratch.

Now that you know what a credit score is, you should be more careful what you do with your money. Remember that money well spent is like rewarding yourself. At a later stage, when you need money desperately or are in need of loans to buy something, having a good score can help significantly. In addition to helping you, the score can also ensure that you are given priority while disbursing the funds and fewer banks are going to turn you away from their doors. On the whole, it is definitely something that you ought to educate yourself in so that you don’t have a tough time in life.

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