Grade 4 Lesson 5: #creditscore
In this short lesson, we will cover the concept of a #credit #score.
A credit score, at the most basic level, is a measure of a person's #Creditworthiness. Creditworthiness is how someone who wants to lend you #money determines how much they would want to lend you. One of the biggest factors that determine if and how much any one will lend you money, is how well you have paid back your prior #loans.
This score is assessed/measured differently in different countries. For e.g., in the #USA it is called a #FICO score. The FICO score is determined/calculated by three organizations (called #creditbureaus) #Equifax, #Experian, and #TransUnion. The score is a number between 300 and 850. 300 indicates very poor credit. 850 indicates solid credit. #Lenders will typically be hesitant to lend to anyone with a credit score of 300. However, they would be very willing to lend to someone who has a score of 850.
Maintaining a good credit score is very important. Reason being that if you want to #buy a #house or a #car, and go to a bank to get a loan to buy it, the first thing the bank will do is look at your credit score. Your credit score can decide whether you get the loan or not, and at what rate of interest. A good credit score gives the lender confidence that you would pay them back on time, and therefore helps you get credit cards and loans at a lower rate.
A credit score is calculated based on the information contained in your #creditreport. In the next lesson, we will talk about #credit #reports.
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