Why Credit Is Important

Has it happened to you? You’re in line at a store, the salesclerk asks you if you would like to open a store card to save money on your purchase. You fill out the application, she processes it and then looks at you sheepishly while telling you that you were denied. That is a mild example of the many ways that having bad credit can affect you. Bad credit can keep you from opening another credit card, and it can also keep you from owning your own home.

To ensure that you have good credit, you must first understand the finer aspects of credit. Your credit – everyone’s credit – is monitored by credit bureaus. These organizations track your vital information as well as all of the financial accounts you hold, your payment records, outstanding payments and debts, and your credit card accounts.

You have the option of seeing what they see by ordering a credit report from an authorized credit bureau. This can help you see where your credit stands, if there are any discrepancies and find out where you need to make changes if your credit is less than perfect.

Your credit history, good or bad, goes into determining your credit score. Your credit score also takes into consideration things you own, your employment status and how much you make. This score determines if you receive credit or not. When you were denied the store card, take that as a sign that your credit score may be lower than the standard.

The best way to be proactive in determining your credit score is to be aware of your holdings. If you have 5 credit cards, maxed to their limit and continue to make only minimum payments on them, this affects your score negatively. Cull down the number of cards you have, try to eliminate store cards with higher interest rates. Pay your bills on time. If this becomes a problem, don’t let embarrassment hinder your financial future, talk with your lender to try and work out a solution before it affects your credit.

All of these issues can affect your ability to obtain a home mortgage or a loan at a price you can afford. Watch your credit history before it becomes a problem.