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Talking about credit scores, what they are, why they’re important, and how to maintain healthy ones, is still somewhat taboo in our day to day lives. Outside the world of finance, credit scores are seldom talked about and often avoided until they become a problem.
For most young people leaving school, your credit score is the last thing on your mind when you’re just starting out in the world. Fast forward to your mid-twenties or early thirties, as you’re trying to buy your first home, finance an automobile, pay for a wedding, or even book a hotel and you soon realize that your credit history impacts many of the major life decisions you make.
For the completely uninitiated, simply put, your credit score is a three digit score which summarizes your credit history and gives a lender information about how safe, or risky, it is to lend you money. If you use credit responsibly and pay it back in a timely and reliable fashion, your score goes up. If not, it tends to go down. Maintaining a good credit score is important because your cost of borrowing can be dramatically impacted by it.
For this reason, and others, it’s important to establish and maintain excellent credit history throughout the course of your life.
Your payment history is the most important factor in your credit score.
Used wisely, credit can be a very useful tool in your life. It can help pay for education, start a business, build a home, and get you out of a pinch. If misused or left unattended, credit can become a source of constant stress and friction that impacts relationships and mental health.
A good credit score is more than just numbers on a screen, it’s an important part of your journey to greater choice, freedom and opportunity in life.