Dictionary.com defines credit as confidence in a purchaser's ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.

Simply put, it means you can buy goods and services without having to pay the full price upfront. Can you imagine what would happen if no one was allowed to live in a house until the price of the home was paid in full? How long would it take you to save enough money to but a house in cash?

How is Creditworthiness Measured

Creditors typically use two methods for evaluating creditworthiness. The first is by using a credit score. In the fast paced world we live in, credit scores provide creditors the information they require to make on-the-spot decisions regarding providing credit, pricing credit and determining appropriate levels of credit to advance to a purchaser. This can work to your advantage, if you have a high credit score. Creditors will typically give higher credit limits at lower interest rates to consumers with higher credit scores. However, for customers with lower credit scores, this means smaller credit limits at higher interest rates.

For loans such as buying a car, buying a house or opening anew credit card account, the creditor may also review your credit report and study your credit history. The creditor might consider:

• How long have you had credit?
• Have you always paid your accounts on time?
• How high are your balances compared to your credit limits (known as usage ratio)
• How much do you owe compared to how much money you make (known as debt-to-income ratio)
• How many other creditors have looked at your credit report recently (known as inquiries)

These factors, among many others, provide guidance to creditors as they decide whether or not to lend you money.

Once you have established your creditworthiness and have one or more active loans, it is important to have a disciplined repayment plan in place to ensure that your credit history remains as clean as possible. After all, your ongoing credit history impacts your credit report and credit score. These, in turn, will determine the type of interest rate you will get on your credit cards. Having a lower rate means you pay less for the money you borrowed and can pay it off faster than if you had a high interest rate. If you want to have a future free of debt, it is imperative that you maintain a positive credit profile.

Paying off debt allows you to take the money you would have paid to a creditor and pay yourself instead. Saving and investing your money builds your personal wealth and ensures that you achieve Financial Wellness.

Even if you are not sure where you stand, but you know you want a debt free future, we can help. Our financial education tools are custom designed to your specific credit profile. We teach you how to understand your current credit standing, how to make wise credit decisions and ultimately, provide you with a debt reduction plan that enables to become fully debt-free.

For more information on how we can help you achieve Financial Wellness, complete the Contact Us page and one of our specialists will be in touch to answer your questions. Or, you can call us at 1-800-282-1649.