Credit

Credit, or more specifically, your credit score shows how good you are with debt.  It’s important because it affects what interest rate you get when you borrow money.  If you have a good credit score, it tells lenders (like banks and credit card companies) that you will most likely do a good job of paying them back on time.  As a result, they’ll charge you a low interest rate.  The opposite is true when you have a bad credit score.  The worse your credit score is, the more of a risk you are to the lender since they know there is a good chance you won’t pay them back on time, if at all.  To balance out the loss they might have to swallow, lenders charge high interest rates to borrowers with low credit scores.

Since you will probably need to borrow money somewhere down the line (like when you buy a house), having a good credit score could save you tens of thousands of dollars in the long run if not more.

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One thought on “Credit

  1. Pingback: Good Debt vs. Bad Debt | Millennial Finance

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