The importance of a credit score

A credit score is a numerical representation of the creditworthiness of a person or reflects your financial behavior. There is a saying that “if you don’t take good care of your credit, then your credit won’t take good care of you” and this pretty much sums up the importance of having a good credit score.

With the millions of people out there, banks and creditors doesn’t have the time and means to get personal with all of us—to sit down with us to get to know us better, to determine what kind of life we live, what we do with our money, and how diligent we are with personal finances. Our credit score is how banks and creditors identifies and entrusts us with money that doesn’t belong to us.

According to studies, a credit score ranges from 300 to 850 and an average American credit score is 670-680. If your score is in the 750s, you are in great shape so getting there and maintaining such score should be your focus and more like to treat it as your new normal because your credit score is going to be a part of your life whether you like it or not.

Since your credit score is a window of your financial movements, it is the mode which banks and creditors use to know if you are a financial risk. If your credit score is low, your risk is high and the interest rates when you apply for a loan will be higher. If your score is very good, your risk is low and you are given a lower interest rate.

It is not impossible to start to build and maintain a credit score.

Build you credit score by starting humble and small. Applying for a credit card with small balance is a good start, according to Dave Castaneda of Garapan.

“I started to build my credit score by getting a credit card three years ago. I did not have a big balance in that card which made me disciplined and just spending beyond my means.”

“I paid my credit card bills on time which helped my credit score go up. It felt like the more I take good care of expenditures and payments, the more trusting the bank is of me because after a year, they increased my credit limit,” he added.

Having a good credit score also makes you avoid huge amounts of front money, according to Maya Marasigan who lives in New York. “I came here and started from scratch. I had no credit score so my landlord then asked for front money in cash—two months advance rent in addition to my security deposit. When I applied for utilities and for a cellphone, they asked from me a huge deposits as well. All was too much for a newbie like me.”

“I got a credit card and started my way up there. I always paid on time and spent on necessities only. I was conscious of not giving creditors a bad information about me. I thought I should trust the process because with patience, I know my credit score will build up,” she added.

Maintaining a credit score is another thing. “With the many worries that I have, I didn’t want consciously maintaining my credit score as an added worry. I have a credit card and I enrolled it in ‘auto-pay’ so no matter what, I pay on time and you build credit score that way,” Luna Cabral of Garapan said.

“I also make sure that I use my card always within my means. This way, my bank knows that my account is active and other banks get this information too because without applying, I get other credit card application offers. But I just want to maintain one card as of now,” she added.