I know that the world of finance can sometimes feel like a bit of a maze but don’t worry, I’m here to guide you through it, and today we’re talking about credit scores, credit reports, and what it means to get something on credit. Let’s dive in!
What’s a credit score?
Firstly, let’s talk about credit scores. Think of your credit score as a financial report card that ranges from 0 to 999. The higher your score, the better you look to lenders. It’s a way for them to see at a glance how good you are at managing your money. A high score can open the doors to the best interest rates when you’re looking to borrow money, whether that’s for a mortgage, a loan, or a credit card.
What’s a credit report?
Next up, we’ve got the credit report. This is like the detailed version of your credit score, showing the nitty-gritty of your financial history. It includes things like your past and present credit agreements, whether you’ve made payments on time, and how much of your available credit you’re using. It’s important to check your credit report regularly to make sure everything is accurate, mistakes can negatively impact your score. You can request your credit report from three main credit reference agencies: Experian, Equifax, and TransUnion.
What counts as buying something on ‘credit’?
Lastly, let’s talk about getting something on credit. This is when you borrow money to pay for something with the promise of paying it back later, usually with interest. The most common form of credit is a credit card, but it also includes things like overdrafts, store cards, buy now pay later schemes, loans and mortgages. When you buy something on credit, it’s important to understand the terms and conditions, including the interest rate, and make sure you can afford to make the repayments. Otherwise, you could end up paying a lot more than you originally intended. Remember, when it comes to getting something on credit, just remember to read the fine print and make sure you’re making a decision that’s right for you.