Now that you know what credit is, you might be wondering why you should care.
Mistakes are just that- mistakes, they shouldn’t have a big impact, right?
Negative reporting to any of the three credit bureaus will negatively affect your score. Negative information such as slow pays, missed payments, and collections will follow you on your credit report for seven years and bankruptcies can be reflected on your report and affect your scoring for as long as ten years.
Your credit score is used by lenders and creditors to determine your credit worthiness and access how much of a credit risk you are.
This is why you should care:
Your credit score determines the interest rate you’ll be given on loans and also determine if a loan is even possible. You should care about your score because it helps determine your ability to buy a house or car, your ability to open a credit card. Your score helps determine the interest rate you receive and which affects how much you’ll be paying for those purchases over time.
2% on a $1,000= $20 vs. 5% on a $1,000= $50 the difference here may not seem like much, but a home is much more than $1,000
Your interest rate affects your monthly payment. The lower the interest rate, the lesser the monthly payment.
If you’re considering a home purchase in the near future, it’s wise to become familiar with your credit report. As previously mentioned in Credit Part 1, there are credit items that carry more weight or heavier scoring than other items, which means some items will impact your score greater than others.
However, don’t let that discourage you. There are things you can to do to improve your credit score.