All about your credit score

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Credit Score

What is your credit score? In a nutshell, your credit score is a number generated a credit reporting agency using a variety of criteria that determine how much credit you can safely have. In other words, your credit score determines how much you can be lent without the risk of you going into default. Your credit score is used as a security means for lending institutions. If you have a poor credit score, you are seen as a risk and therefore you will not be granted credit.

The use of your credit score goes beyond borrowing money. Utility companies, phone companies, employers and landlords all use your credit score. With a low credit score, many people have a hard time getting a place to live and basic utilities. Often, having a low credit score translates into steep security deposits.

Credit companies and lending institutions have recently started to market directly to people with low credit scores. Prior, people with low credit scores were unable to get credit cards and loans. This is has left a huge untapped market for lending institutions to exploit. While this may seem like good news, there is a heavy duty price to pay. People with low credit scores are subjected to outrageously high interest rates. Lending institutions trade the low security risk associated with low credit scores for high return through high interest rates.

The bad news is that most people with poor credit scores are the same people who can least afford to pay these high interest rates. The end result is a dramatic rise in personal bankruptcies. The sad truth is that there are companies that prey on people in finical trouble.

It is critical that, if you have a low credit score, to isolate yourself from these 'too good to be true' offers. Instead, work on improving your bad credit score through comprehensive debt management.

More information on repair bad credit scores and debt management.

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