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.
Credit Scores and What They Mean
Many people associate their creditworthiness with what is known as acredit 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 |
