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by Aisling Fields

For many people, credit is a scary thing to think about. This is mostly because they do not always understand it. National Credit Education Month is a great time to learn about the ins and outs of credit.

“Understanding what credit is, how it works and the impact that it can have on you now and in the future is an important step in becoming financially fit.” said Emily Hines, an Alabama Cooperative Extension System human sciences regional agent.

A person’s credit is based on a score between 300 and 850. This score lets a potential lender know if someone is worthy of credit. Scores are based on credit history, which is affected by a number of things. These things include number of accounts open, debt levels, payment history, etc.

The higher the score, the better chance someone has of getting a loan. This is because credit scores are used to determine if someone will likely repay a loan on time.

There are many things that a credit score is necessary for such as buying a car, saving on insurance or buying a house. To do all of these things, many people have to take out a loan from places like a bank or credit lending firm.

It is important to understand what builds or rebuilds credit, as well as what hurts it. Many people do not realize how easy it is to build credit if done correctly.

“Making your payments on time as agreed and keeping your balances low will have a positive impact on your credit,” Hines said.

When starting to build credit, it may be in a person’s best interest to start small and open one credit card. Try putting small amounts on this card such as gas once every month. Remember to keep a low balance and always pay it off on time. Doing these items is a big step in the right direction.

Just like people can build their credit, they can hurt it even quicker. Credit can be hurt the most by not making scheduled payments. Anytime a loan is not paid back at the agreed rate and time, there is danger of hurting credit.

“If you would like to learn more about your credit, the Extension financial resource management and workforce development team offers financial education classes across Alabama,” Hines said.

The regional Extension agent in your area can help you sign up for these educational classes. More information on credit is also available in the Alabama Extension publications How to Build or Repair Credit and Credit Report versus Credit Score.