The Truth About Credit

This month we’re talking all about credit; how it works, why it’s important (and when it’s not), and how to take a system that can seem like it’s working against you and use it to your advantage.

Your credit is just an estimate of your ability to pay back a loan you’re given. That’s it. It’s how potential lenders like mortgage companies or credit card companies try and decide whether to give you a loan and at what interest rates. You’ve probably heard of credit scores and credit reports. These are just ways of trying to summarize your overall “credit” in a standardized format. They’re not perfect, but they are the system we have so it’s important you understand how it works and what a difference it can make to you in the long run. While your credit history is what makes up your credit report, it’s not only potential lenders who look at it. Utility providers, potential employers, landlords, and even insurance companies all access credit reports so keeping yours in good shape is, for better or worse, pretty important.