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What is a Credit Score and How Will It Help You Save Money

What is a Credit Score and How Will It Help You Save Money

With people taking on more debt then ever, and being stuck with higher interest payments, knowing your credit score can help better organize your finances. For those with good scores, your credit score can help you negotiate lower interest payments. For those with lower scores, increasing your credit score is something to work towards to decrease interest payments and debt.

So what is a credit score? It is a score that, depending on where you are from, ranges from 300 (bad credit) to 850-900 (excellent credit), which determines interest rates on your loans, credit cards, and if you even qualify for a loan. Banks view credit scores around 650 and under with caution, with credit scores between 350-600 categorized as subprime. Having a perfect score is extremely hard, and not necessary to be considered for preferred interest rates.

There are strategies to increase, manage, and safeguard your credit score. Credit scores can, however, be severely undercut by late payments, maxing out your credit card, and of course, bankruptcy. Having your credit score accessed too frequently, outside a set period of time, also decreases your score.

What helps increase a credit score and lower your interest payments? Paying your bills on time and building a good credit history is of the upmost importance. Having too many lingering payments will hinder any gains. Also demonstrate early on that you are a good candidate and risk for banks. This might mean taking out a smaller loan to show you can pay off your debt in a timely and consistent manner. And with credit cards, maintaining your credit limit and paying off your card helps safeguard against unnecessary penalties.