Money Matters Explained: Credit Scores

Guiding Questions

In this blog, we’ll explore credit scores and why they are important. Many people hear about credit scores when discussing loans or credit cards, but don’t fully understand how they work. Common questions include:

• What is a credit score?

• Why does it matter?

• How can someone build good credit?

What Is A Credit Score?

A credit score is a number that shows how trustworthy someone is when borrowing money. It helps lenders decide whether to approve a loan or credit card application.

Credit scores usually range from 300 to 850. The higher the score, the more financially reliable a person appears.

Main Factors

A credit score is based on several key factors.

• Payment History: Whether bills are paid on time

• Credit Usage: How much of available credit is being used

• Length of Credit History: How long accounts have been open

• Types of Credit: Credit cards, loans, etc.

• New Credit Applications: How often someone applies for new credit

Why It Matters

A good credit score can help someone qualify for loans, lower interest rates, and even apartment rentals. A low score can make borrowing more expensive or difficult.

Building good credit early and using credit responsibly can create long-term financial advantages.

Review

• What does a credit score measure? Financial reliability

• What is the most important factor? Payment history

• Why is a high credit score beneficial? Lower interest rates and better approval chances