Credit: What Is It and Why Is It Important?

Credit can be a powerful tool in achieving important financial goals. It allows you to make large purchases (such as a home or a dental practice) that you otherwise would not be able to afford if you were paying in cash. However, it is very important to understand wise borrowing strategies and money management when utilizing credit. Irresponsible use of credit products can have a negative impact on your financial well-being.

Diagram of what credit is made up from

Credit Scores and What They Mean

Many people associate their creditworthiness with what is known as a credit score. This is a numerical representation of your trustworthiness as a borrower. Lenders use your credit score to determine whether they are willing to loan you money and, in many cases, what interest rate you will be charged. The higher your score, the less risky you appear as a borrower and the more likely you are to receive approval for new accounts and to receive a favorable interest rate. In order to have a credit score, you must have at least one credit account that is at least six months old.

Classification Range
Excellent 750 & above
Good 700–749
Fair 650–699
Poor 550–649
Bad 550 & below