As you know, your credit score is important. How important? So important that an entire industry exists solely to monitor and report your credit score.
So, what does your score mean? It tells lenders (companies who offer lines of credit) whether or not you’re good about repaying your debts and paying them back on time. If you pay on time and don’t carry a lot of debt, then you’re a good credit risk, and you’ll get loans, credit cards, mortgages and great interest rates. If you pay late and max out your existing cards, y ou either won’t be eligible for additional loans or you’ll end up with much higher interest rates.
Understanding Your Credit Score: Who Are the Major Players?
When it comes to credit reports and credit scores, there are three major players: Experian, Equifax and TransUnion. These are the three credit reporting agencies, or credit bureaus, that collect information about your lending habits. These credit bureaus compile credit reports, which determine your credit score. These reports include several factors:
- Your personal identifying information, such as current and past addresses and your Social Security Number.
- Credit accounts called trade lines, which is essentially a list of creditors who report your credit usage and payment history.
- Any public record information dealing with your finances, including bankruptcies, foreclosures, delinquent accounts, wage attachments, and anything from collection agencies.
- Credit inquiries (anyone who requests your credit report) for the last two years.
Show them the long-term benefits. Leading by example is one of the best ways parents can teach their children about personal finance together and the kids split the money.