What is a credit score and why does it matter? 

Your credit score is based on your track record of paying financial obligations in the past. Various services and needs ranging from your utilities to future loan approvals and landlords will call your credit history into question as you apply for service, housing, or financing. They are using your credit score to determine your ability to repay them.

Better your repayment history, stronger your credit score.  If you have had payment issues in the past, these are likely reflected through a low credit score.

 Given your history, a lower credit score characterizes you as more likely to default. Therefore, you are more likely to receive higher interest rates on any loans as the lender is offsetting the increased risk of default. This applies to everything from auto loans to business loans and even living arrangements.  A landlord is not going to want to rent property to a tenant they don’t think will be able to pay them.

In contrast, a higher credit score leaves you much better off when seeking these types of services. It characterizes you as responsible and gives others confidence you will pay them back as promised. The positive effects continue to build as you are also much more likely to qualify for a variety of better deals, including those with lower interest rates or even 0% interest introduction periods on new loans. Essentially, a higher credit score is going to make more options available to you at better financing terms.

Building credit takes time as showing payment history requires months and months, potentially years of payments made. Paying your bills on time is the most crucial factor, and even skipping one payment can knock points off of your score. Paying these balances in full is best. Light, but regular use of credit cards can boost your credit as well.