What's A Credit Score And Why Should I Care?Aug 04, 2021
Greetings, Young & Scrappy friends! My name is Daniel, and I am brand new to the Young & Scrappy Team. To be totally honest with you, I really consider myself brand new to personal finance in general! I’m excited to get to learn and grow alongside all of you.
I’ve never made a ton of money myself (I’m an actor, you dig?), so I’ve always just assumed anything even remotely related to money in my life must be BAD AND WRONG AND UNSALVAGEABLE. So… I just never looked too closely at any of it, you know?
All to say, when Michelle and I first sat down together to discuss credit scores, I assumed I had an awful one.
I took a deep breath and looked it up– knowledge is power, right?– and I actually have a really good credit score!
(I’m thinking of adding it to my dating profiles.)
Now, here’s the thing: maybe you also secretly have a better credit score than you suspect!
But Wait–What’s a Credit Score?
If you visit Equifax’s website, the official description of a credit score is “a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time.”
Thanks, Equifax! But, okay, what actually is a credit score? Michelle broke it down for me like this: Imagine you have a buddy who asks to borrow something from you. You would probably want to know about your pal’s previous friendship-borrowing history to determine what you can expect as a lender. Is your friend known for returning/paying back in a timely manner, for example? Can you expect them to pay you back at all?
A credit score essentially tells your prospective financial friends (lenders, credit card issuers, etc.) all about *your* payment history.
Cool. But Why Should I Care?
In addition to making you feel like a badass adult and/or increasing your romantic prospects (JK–or am I?!), having good credit is actually a mad useful tool for making your big financial dreams come true.
You want to buy a house? You better have good credit to get approved for a mortgage.
Heck, you want to RENT a house? Your future landlord will likely also check your credit score, as a way of ensuring that you’ll pay your rent on time!
New car? Big purchase? New credit card? Consolidating your student loans? All of those things take good credit too!
The bottom line is this: the better your credit score, the more easily you’ll move through the financial world. Having good credit will also save you lots of money through the power of lower interest rates over time.
So, now you know what a credit score is and why it’s probably worth it for you to check yours out! We’ll keep delving into the Wonderful World of Credit Scores over our next few blog posts, but if you really, really want to dig deep, consider registering for our sweet Crush Your Credit mini-course.
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