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Credit Score: 5 Things To Know

By: kjmena

Credit is something that everyone has, whether they know it or not and is one of the key aspects of anyone’s personal finances. However, many people know very little about how a credit score works and how it affects their lives.

This can create problems when it comes to future financial goals and milestones. Many people lack basic understanding of credit due to lack of knowledge. How to maintain a credit score isn’t something that is taught in school or that parents teach their kids necessarily, instead it’s left for more of a personal lesson, which can lead to disastrous consequences.

Americans are currently in more than $700 trillion dollars of credit card debt and that number is growing each year. As a result, more and more people are struggling to pay their bills and pay off their debt. However, the best way to tackle debt is to know how it works and how you got into debt in the first place.

1. A credit score is based on a number of factors.

Credit score is based on more than just your ability to pay credit card bills. In fact, your credit score can be affected by your utility bills, cable bills and medical bills. The reason for this is because that is the way these companies get you to pay them back without collateral.

They bring down your credit score and give you negative feedback on your credit report. So when you fail to pay your utilities, you are actually hurting your credit score and decreasing your chances of getting any credit in the future.

2. A credit score is important to your future.

Unless you plan on paying for everything upfront and in cash, you will need a credit score. In order to get a car or a house or even rent an apartment you will need a credit score. So going through life without acknowledging your credit score can be very detrimental.

You should constantly be monitoring your credit score, whether it’s through a third party website or directly through one of the 3 credit bureaus (Equifax, Experian, TransUnion). The best thing to do is to check your score on a monthly basis, that way you can watch for any changes regularly.

3. You can still get credit if you have bad credit.

Contrary to popular belief, you can actually still get a line of credit even if you have bad credit. Depending on the lender, they might vary on their credit score threshold for giving out loans or lines of credit.

In addition, some lenders will simply require you to put down more money initially in order to decrease their risk in lending you money. Another option that lenders will give you is a higher interest rate on your loan. This again is to decrease their risk and improve their chances of getting paid back.

You should check all of your options when it comes to credit, especially when you don’t have the best credit score.

4. A nearly perfect credit score can be a bad thing too.

Having a good credit score is a really good thing to have on your personal financial resume but having a nearly perfect score can be a problem.

This is because when creditors see that you aren’t using your credit, they will be less likely to lend you any money. Creditors like to see people who actually use the credit they give out. Therefore, the best thing to do is to use any credit you do get, but to use it wisely and pay off your monthly payments.

Also keeping a balance on your credit card shows your creditors that you are using your credit and making the best of it.

5. Watch out for interest rates.

An interest rate is the percentage of a loan that is charged to a borrower, basically the extra amount of money that will be owed on the loan to be fully paid off. This is the trickiest thing about credit and the costliest.

Interest rates can range from 8% all the way to 24% depending on the lender and your credit score. The better your interest rate, the better your loan and the deal. Interest is the leading cause of crippling debt problems.

Interest can add up quickly and in certain cases can increase dramatically when you miss payments or default on your loan. Pay attention to this number before signing any documents and make sure it’s a rate that is affordable.


What to Do Before Opening A Line Of Credit

There are a couple of quick things you can do before you apply for a credit card or loan, so that you are prepared for when you do get approved for a line of credit.

  1. Check Your Credit Score
  2. Read The Fine Print
  3. Shop around before making a final decision.
  4. Know the interest rate.

Credit is a very easy thing to mess up and even harder to fix. When it comes to having good debt, it’s all about your choices. Making wise choices on where to spend your money and on when to use your credit.


Credit is vital for financial success and you don’t want to blow it early. If you feel like you need extra help, don’t be afraid to ask for professional help. An expert will be able to review your personal finances and give you the necessary guidance and tools for going forward.

  • Take the first step!