Would you like to pay with cash or credit? It’s a simple question we all face daily as modern consumers. With the former payment option, it’s a simple, straightforward swap of green tender for a product offered or service rendered. Once the exchange takes place, it’s done, over, finished, and final. Opting for the latter of the two alternatives, however, gets a bit more complicated.
Credit cards have become a convenient way by which many Americans finance transactions and purchases in their daily lives. In fact, it’s become more common nowadays for consumers to pay for purchases with a card rather than cash.
What does this mean for you? If you haven’t obtained one already, it’s highly likely you’ve considered a credit card of your very own. Hassle-free and incredibly helpful, they offer plenty of benefits.
Yet, before you sign up and start spending on someone else’s dime, it’s important to understand what exactly credit is, from your own personal credit report, history, and score, to the overall ways in which credit-based exchanges function in our society.
To help simplify things, we’ve put together a simple guide with everything you need to know about your credit score and how it affects you. Read on for a full breakdown on consumer credit with some additional tips on identity theft protection and credit repair services.
What is a Credit Report?
In short, a credit report is an in-depth analysis and summary of various information regarding your loan history. Credit bureaus compile these statements, analyze your past purchases and track record, and assign a number or score that reflects your overall credit worthiness.
These reports typically include a variety of factors including loans you’ve used in the past, loans you are currently using, loans you’ve defaulted on or are in collections for, records of any incidents of bankruptcy or foreclosure, how much you’ve borrowed, your payment history and whether or not you’ve paid on time. They also consider similar information that sums up your activity – generally over the past seven years – as a borrower.
What is a Credit Score?
Simply put, a credit score is a three-digit number generated by a computer system that reflects how reliable you are as a borrower. These programs scan through your borrowing history by accessing your credit reports, looking for patterns, characteristics, and any red flags that might make you less likely to pay back any loans acquired.
Your credit score is a simpler way for companies, banks, credit unions, and lenders to assess your qualifications for a loan without reading through lengthy history records of your past transactions. High scores represent to lenders a good candidate for a loan, while lower numbers generally indicate a riskier candidate and often make getting a loan harder and more expensive. There are numerous credit scores attributed to your history, but the primary one used by most agencies is the FICO score that generally falls between a scale of 500 and 900.
How Does My Credit Score Affect Me?
As mentioned above, your credit history and your credit score allows potential lending agencies to assess your qualifications as a borrower. Nowadays, credit scores also affect other areas of your life, from your home to your job and everything in between.
Utility companies and potential landlords will often review your credit score before you can enlist their services or move into their facilities. Employers also check credit scores to make a judgement regarding your financial responsibility and character. Insurance companies do credit checks to determine the rates at which they’ll charge you for their services, as well.
It’s important to maintain a good credit score so that you, as a consumer, can have access to the best loans possible. From buying or renting a home to acquiring a car, acquiring and utilizing loans to finance big purchases has become a near necessity.
The better you can cater to your credit health by paying off your monthly fees fully and on time, the easier it will be for you to obtain loans and at the best rates possible. Likewise, if you have acquired a bad credit score, don’t panic. It is possible to rebuild your credit reputation with time.
Unfortunately, identity theft has become all too common given the vast amounts of personal information we store on computers these days. If a cybercriminal gets a hold of your social security number or credit card account numbers and starts racking up debt, then you could be on the hook. Employ strict password protection techniques to keep your personal information private and prevent identity thieves from ruining your credit score.
For more information on your score, how to fix your credit, and more, contact your local qualified credit service agency.