Why is your credit score important?

Posted by Alfonso Salazar on Wednesday, February 19th, 2014 at 2:28pm.

Everyone is always concerned about their credit score; and it is understandable why. Your credit score can determine whether you get that brand new car you've always wanted, a house for you and your family, and even keep you from insurance and employment. First you need to understand what makes up your credit score.

Is your credit score importantThere are 5 factors that determine your credit score:
  • previous credit performance
  • current level of debt
  • the time that the credit has been in use
  • the types of credit available
  • and the pursuit of new credit
Out of each of these factors, your previous credit performance is the most important. Why is that? This is because it shows those looking at your credit how well you paid or are paying off your previous debt. 

We are going to focus on why your credit is important when looking into buying a house. Your credit is the main factor when it comes to purchasing a house. If you have a credit score lower than 620, this could hurt your chances in getting the home because anything below a 620 is considered to be subprime. Subprime loans are extremely difficult to obtain, and sometimes even impossible. 

If you score is not 620 or better, don't worry because there are a few things you can do to help raise your credit score.

  • Set up payment reminders
  • Keep balances low on any credit cards
  • Begin to pay off debt, instead of dodging it.

Each of these steps to getting a better credit score may seem easier said than done; but once you establish a routine it becomes extremely easy. By setting up payment reminders it will keep you making payments on your loans and credit cards in a timely matter every month. In time this will help you keep you balances low on any of your credit cards. Remember, opening more credit cards doesn't always help you credit score; before applying for any new ones, make sure your previous credit cards are paid off. Debt is one of the scariest things in life. It will take time to pay it off; but every little bit you put towards it brings you closer and closer to a better credit score. 

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