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What is Credit?

In previous centuries, creditor relied on reputation and word of both to determine your borrowing eligibility. These days, credit is determined by big lenders, merchants, and service providers who allow you to borrow funds based on your creditworthiness or in lay terms your credit score. Your credit score is determined by five main factors:

1) Payment History: the largest component is how frequently you pay your debts on time. Payment history accounts for 35% of your FICO score.

2) Amounts Owed: or your credit usage. How much credit are you using based on what you have? Also known as credit utilization ratio.

3) Credit History length: how long have you had the credit you have. The longer credit history, the higher credit score.

4) Credit mix: how diverse is your credit portfolio? A good mix of loans, credit cards, and other credit accounts help to raise scores.

5) New Credit: the number of new credit accounts you’ve applied for or recently opened, these are known as hard inquires.



The Effects Of Bad Credit

According to Experian, approximately 16% of Americans have bad credit, a score falling between 400-580, while 34.8% of American consumers have sub-prime credit, a score falling between 580 and 699.

This may seem like not a significant issue, but with this data almost half of Americans are living with poor financial health. Above anything, Bad Credit can ruin your chances of living a comfortable life. From apartment denials to approval odds, Bad Credit can damper your financial and personal health.

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· Lower Interest Rates for Cars, Mortgage, Credit Cards & Lines of Credit.
· Improved Likelihood of Qualifying for a Loan or Credit.
· Approval for Certain Jobs.
· Larger Credit Card and Loan Limits.
· Better Credit Card Rewards.
· Easier Approval for Rental Properties.
· Lower Insurance Rates.
· Build Business Credit when you have good personal credit.
· More likely to get approved for Business Loans & Credit Cards.
· Get a Cell Phone Without Prepaying or Making a Security Deposit.

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