Khanacademy: Financial Literacy: What Are Credit Scores?:

A credit score is something that shows the history of the payments and credits you have made in the past.

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For example, say you never pay your debt. You’re deeply in it, and are taking out new loans all the time, saying; “Doesn’t matter to me!”

One day, you try to buy a house. You take out a loan. The people selling the house look at your credit scores, and see all those bad credit scores! They think; it’s a lot of risk to loan this money to the person, on credit.

So, they increase the money the person has to pay them over the months, to pay off the score. Instead of 752 dollars a month, for 91 months, they make it 791 dollars a month, for the same amount of time.

That might not seem like a big difference – 39 dollars – but it is when you time it through all those months.

The first one, for people with good credit scores, would be 68432 in total. The bad one, for people with bad credit scores, would be 71981! More than 3,000 dollars more, in the end!

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So, to tell if they should charge you more or less “interest” people, yes, look at your credit scores. The credit scores are measured by numbers.

Bad – 300-579.

OK – 580-679.

Good – 680-739.

Very good – 740-799.

Excellent – 880-850.

Then, the people take the numbers, and calculate them – to see if they should charge you extra money or not, and how much!

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So, when you’re trying to take out a loan by credit, you might want to make sure your credit score is low, not high!

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Thanks for reading!