Your Credit Score - What does it Mean?
Your credit score is a rating that tracks how well you are at managing your debt. The rating is based on several factors, but two of the key factors is how much debt you have and how well you are at paying your bills on time. The higher your credit score, the more responsible you seem in the eyes of the lender. A low credit score can be problematic because to lenders you are not seen as responsible in managing your credit or debt.
Your credit score has an intimate relationship with any loan you might have, whether secured or unsecured. The interest rate you pay on any loan and whether you are even eligible to take out a loan is determined by your credit score. If you have a low credit score, you are a higher risk for creditors and they charge a higher interest rate in order to mediate this risk.
Not only are interest rates affected by your credit score, but other non-interest types of necessary expenses are also affected. For example, the cost of insurance; your ability to rent an apartment or secure utilities without having a co-signer; and in some cases it can affect whether you will be selected for a job. While these may seem to be necessities that should not be affected by your credit score, more and more your credit score is related toward how responsible and reliable you are in being able to manage your money.
A few points increase in your credit score can make a big difference in how much you pay in interest. The less you pay in interest, the less debt over time you will incur. You can save thousands of dollars just by increasing your credit score.