Lesson 3: The Importance of Credit – Napkin Finance

Lesson 3: The Importance of Credit

Why is My Credit Score Important?

Your credit is your financial “reputation”.

Your credit score becomes an increasingly critical measure of your financial health as you go through life. From trying to get a car to buying a home, your credit score will be checked to determine if you are eligible for the purchase and what interest rate you will receive.

Renting or Buying home? Your credit matters.

Even if you’re not currently looking to buy, landlords check your credit score when you’re applying for an apartment lease. In some states, employers frequently run credit checks on prospective employees, especially those who would handle money.

California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington have restricted the use of credit histories of applicants and employees.

You can’t achieve a great credit score overnight. You have to show that you can responsibly handle borrowed money over time. It’s important, therefore, to start building credit early so that you can put your best financial foot forward when it matters most.

Improve Your Credit Score

Helps Your Credit Rating Hurts Your Credit Rating
Paying bills on time Missing or late payments
Making monthly payments in full Not making the minimum monthly payments
Checking your credit report and score for accuracy Applying for numerous credit cards
Keeping account balance below 30% of limit Exceeding account limits
Taking out a loan for a major purchase Defaulting on a loan
Ask for a credit increase Closing older credit card accounts
Consolidating all credit card debt under a personal installment loan Having an account sent to collections
Asking the collector to erase the account from your credit file when you pay it off Filing for Bankruptcy


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The simple information you need
to clean up your not-so-simple finances.