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A credit score is like a report card for grown-ups that shows how good they are at paying back money they borrow. If they have a high score, it means they are really good at paying back, and if it's low, they need to get better at it.
Creditworthiness is a measure of a borrower's ability to repay a loan and reflects their financial health and trustworthiness. It is determined by evaluating factors such as credit history, current debt levels, income stability, and financial behavior.
A credit report is a detailed record of an individual's credit history, compiled by credit bureaus, which lenders use to assess the creditworthiness of potential borrowers. It includes information such as personal data, credit accounts, payment history, and public records, influencing one's ability to obtain loans and the terms offered.
Concept
Payment history is a record of how consistently an individual or entity has met their financial obligations over time, serving as a critical indicator of creditworthiness. Lenders and financial institutions scrutinize this history to assess the risk of extending credit or loans, making it a pivotal factor in determining interest rates and credit limits.
Credit utilization is the ratio of your credit card balances to your credit limits, which significantly impacts your credit score; maintaining a low Credit utilization rate is crucial for a healthy credit profile. A utilization rate below 30% is generally recommended to improve or maintain a good credit score.
Debt management involves strategically handling debt to ensure it is paid off efficiently while minimizing financial strain. It encompasses budgeting, negotiating with creditors, and selecting the right repayment strategy to maintain financial health and avoid insolvency.
Personal finance involves managing your financial resources to achieve your life goals, including budgeting, saving, investing, and planning for retirement. A strong understanding of Personal finance principles empowers individuals to make informed decisions about spending, saving, and investing, ultimately leading to financial security and independence.
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