Some Credit Basics

In this day and age there is one thing that will affect nearly every person’s life at one time or another, and that is having good or bad credit. Understanding how to build and properly improve your credit score is a major factor to achieving financial success in life. Lots of people are walking around thinking that just because they have their paycheck deposited into their checking account (via direct deposit) and are willing to have their loan payments directly withdrawn from that same checking account that it will be easy to get a loan at their local bank. This is not particularly true. Now granted most banks will give you a lower rate or perhaps an incentive to set up an auto-pay from your checking account, but they still are going to base the initial decision for the loan on your credit, not on your relationship with the bank. Your credit is being used as your word. There was a saying that I'm sure has been heard by many of you reading that goes as follows: your word is your bond. Think of credit as your word, according to the lender.
You could end up saving yourself hundreds of thousands of dollars through-out your lifetime based on your ability to repay your debts and fulfill your financial obligations as promised. The explanation is very simple and most of us know it, but choose to ignore it, and those who do not know it like they should, do not take the time out to learn. Credit scores range from 300- 850, and 95% of the time, If you have a lower credit score lenders will be hesitant to lend you money. A low credit score says that you break promises, or at least the promise to pay and pay on time. They know that you have had financial troubles in the past. Now because of your history, you would be considered a high risk to lenders and they will refuse to lend to you. If however they decide to lend money to you, they will charge you a higher interest rate to offset that risk.
The flip side is quite different. A high credit score sends a positive message to the lenders that say basically that your word is good and that you keep your promises where borrowing money is concerned. Lenders know their chances of collecting their money are high and that you have been responsible in the past. Not only are they going to be willing to lend you the money, but they will feel comfortable charging you a lower interest rate.
Be aware that aside from just loan or credit card applications filling out other applications can affect your credit . One of the most important of these is home and automobile insurance applications, and another more common applications would be for either cable/satellite/Internet service provider or cellular phone service provider. Almost everyone at some point is going to need to have an auto insurance policy and some of these previously mentioned services.

Please bear in mind that more and more businesses are relying on credit checks to determine whether or not you are worthy of utilizing their services. Banks are no longer the only institutions that require you to have good credit.
If you are seeking to make any major financial moves such as: purchasing a home, or an automobile, renting an apartment, looking for a new job. It is essential to take the time out to check and improve your credit where necessary and if necessary. This may prevent you from paying higher interest for a particular product, or determine whether you get it or not.