While you may know a lot about test scores, how much do you know about credit scores? One day, these scores will have an important influence over financial matters in your life, so it pays to learn about them sooner rather than later.
Credit Score History
Credit scores are like the grades on your report card. They’re a way to quickly summarize how well you’re doing financially. Credit scores help lenders gauge how good you are at making timely payments. This helps lenders understand if you’re a trustworthy borrower. Before credit scoring existed, determining creditworthiness was difficult and relied a lot on reputation and word of mouth.
How Credit Scores Work
Today, credit scores are calculated based on your credit history, which is tracked by credit reporting agencies. Your credit history includes your payment track record, public records information and personal data, such as where you’ve lived and worked. Companies take this information and use a mathematical formula to figure out your credit score. In general, the better you are at paying back loans on time, the more your credit score improves.
The Importance of Credit Scores
Having a good credit history and credit score is the key to qualifying for loans and credit cards with low interest rates and flexible terms. You can start building good financial habits today by managing your money wisely and paying bills on time.
A credit card can help you establish credit and build your credit history. It’s a good tool for learning to handle credit responsibly. Learn more about credit cards at Advancial by visiting Dinero Visa®.