Credit is the lifeblood of the economy and without credit, it will be close to impossible for individuals, families, and businesses to survive.
Credit affects all aspects of our lives and without credit, you will not be able to purchase a home, purchase a car, purchase a business, etc.
Credit is the engine that drives all financial aspects of our lives and that is why credit matters.
In order to qualify for the best rate on loans and other financial products, you must have great credit.
Having great credit guarantees that you will be able to play the game of life and have a great lifestyle.
On the other hand, not having great credit will surely guarantee a miserable existence and very limited opportunities available to you.
The key to having great credit is making sure that you understand how to use credit responsibly and thus maintain a great credit profile.
There are three credit bureaus that collect, store, and share your credit behavior with financial institutions, and these financial institutions pay these three major data-collecting behemoths large sums of money for your credit profile.
The three main credit bureaus are Transunion, Equifax, and Experian.
These three get your personal data from the financial institutions that you have relationships with and in turn, share your information with other financial institutions when you try to apply for credit.
In order to make credit decisions, these financial institutions turn to the three bureaus to obtain your credit behavior to see if you are worthy of getting a loan, etc. Your financial behavior comes down to a three-digit number called your credit score or most typically referred to as your FICO Score.
FICO refers to "The Fair Isaac Company"
The Fair Isaac Company developed the first algorithm for computing your credit score to enable lenders and financial institutions to make quick and impartial lending decisions using your three-digit credit score to determine your creditworthiness.
There are other platforms that provide you with free credit scores, however, the only scores that 90% of lenders use is the FICO Score.
There are basically 5 factors used in the computation of your credit score, and these are:
This post is meant to give you a quick snapshot of why credit matters. In my next post, I will go over how to fix errors on your credit report and also how to repair your credit in order to be able to get qualified for better rates on loans.
Credit affects all aspects of our lives and without credit, you will not be able to purchase a home, purchase a car, purchase a business, etc.
Credit is the engine that drives all financial aspects of our lives and that is why credit matters.
In order to qualify for the best rate on loans and other financial products, you must have great credit.
Having great credit guarantees that you will be able to play the game of life and have a great lifestyle.
On the other hand, not having great credit will surely guarantee a miserable existence and very limited opportunities available to you.
The key to having great credit is making sure that you understand how to use credit responsibly and thus maintain a great credit profile.
There are three credit bureaus that collect, store, and share your credit behavior with financial institutions, and these financial institutions pay these three major data-collecting behemoths large sums of money for your credit profile.
The three main credit bureaus are Transunion, Equifax, and Experian.
These three get your personal data from the financial institutions that you have relationships with and in turn, share your information with other financial institutions when you try to apply for credit.
In order to make credit decisions, these financial institutions turn to the three bureaus to obtain your credit behavior to see if you are worthy of getting a loan, etc. Your financial behavior comes down to a three-digit number called your credit score or most typically referred to as your FICO Score.
FICO refers to "The Fair Isaac Company"
The Fair Isaac Company developed the first algorithm for computing your credit score to enable lenders and financial institutions to make quick and impartial lending decisions using your three-digit credit score to determine your creditworthiness.
There are other platforms that provide you with free credit scores, however, the only scores that 90% of lenders use is the FICO Score.
There are basically 5 factors used in the computation of your credit score, and these are:
- Payment History - 35% impact on FICO Score.
- Credit Utilization - 30% impact on FICO Score.
- Length of Credit History - 15% impact on FICO Score.
- Amount of New Credit - 10% impact on FICO Score.
- Credit Mix - 10% impact on FICO Score.
These are the main factors that impact your credit score and these scores range from 300 to 850 and the higher your score, the better.
The key to maintaining a high credit score is to monitor your credit consistently making sure that there are no mistakes or incorrect data on your profile and ensure that you are not a victim of identity theft.
Click here to Monitor Your Credit and FICO Scores
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