Handling money, especially if you have just started earning can be challenging. There are so many things to take into consideration and understanding how to make the most of your money is one of them.
When we talk about “score” it can be used in many different scenarios. We could be talking about a score on an exam paper or scoring the winning goal. However, there is a very important score that people don’t talk about as much – the score that assesses your financial history. Your credit score gives you a clear indication of how your finances are doing at the time.
You may be asking yourself, why is my credit score so important? Your credit score is not only so that you have a view of your financial history, but it’s also a way for banks and investors to gauge whether you’re a safe bet to loan money to. The actual “score” part of credit score refers to a 3-digit number that simply summarises all the information that’s in your credit report.
There is a very simple way to know whether you have a healthy credit score and as with most scores – the higher the better. The higher numbers mean you are more likely to be able to pay back your loan. There are many different elements that can affect your credit score, here are just a few of them:
- How long you’ve had a credit history
- The different types of credit you use
- When looking at your debts, have you missed any payments
- What limit you have on your credit card(s) and whether you spend close to this limit.
Another reason why your credit score is important is that banks and lenders could use your credit score to determine how much interest you should pay. For example, if you are looking to buy a car and you have a healthy credit score, you have a good chance of getting a better interest rate and you may even have more bargaining power over this interest rate, as you have a favourable credit history.
As you can see, ensuring you have a healthy credit score is vital for you for when you may need to loan money. If you’re nervous about your credit score, don’t worry, we have a handy tool that will get you a copy of your credit score and your credit report. The best part is that you can get one free credit score per year – pretty cool right?
You can get your free credit score here