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Is a Credit Score Really Important?

June 3, 2010 by · Leave a Comment 

As you move on in life, you tend to discover new things which were never really causes for concern before. A credit score is one -very important- such thing.

The generally accepted and used method of credit scoring is the Fair Isaac Corporation (FICO) method. By analyzing your credit history and current financial status, the FICO method will come up with a score. This score lets lenders know if you are a credit risk and how much so. For example, if your credit score is in the lower levels, you may be refused a loan or credit card. In the event that your request is accepted, you will be slapped with high interest rates and heavy penalties for missed payments.

Therefore keeping a healthy FICO score is in your best interests. A couple of things to keep in mind to improve the score are making payments on time and keeping a sizeable margin between the amount owed and the total credit allowed in a credit card. These two things may sound simple, but it is surprising how many people simply fail to follow them.

The other thing people constantly fail to do is to report and dispute incorrect information on their credit reports. Ignoring them and not making any payments towards them are cardinal mistakes. For example, if the report shows that you made a $500 purchase somewhere which you didn’t you should dispute it immediately. Not paying it until the dispute is settled is fine because it won’t adversely affect your credit score. But not paying and not disputing it will hurt you badly.