Whether you’re planning on purchasing a brand new car or a used car, one thing will remain equally important in both situations: your credit score.  According to Wikipedia, a credit score is defined as follows:

A credit score is a numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information, typically sourced from credit bureaus.

Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits.

Making Mistakes Early On

Where most people fail to realize the importance of credit is when they receive their very first credit card (which is usually around the ripe old age of 18).  I remember being a freshman in college and walking to class.  Along the way, there were vendors set up, and each vendor was trying to entice college kids to come and sign up for a credit card.  In return, you would get a free t-shirt or some other sort of “gift”.  However, the fact of the matter is that many college kids (and adults) view credit cards as being free money.  Therefore, they don’t ever really think twice about the consequences until it is too late.

If you’re thinking about purchasing a vehicle or a house, you had better make sure that all of your bills are being paid on time.  For each time that you don’t pay a bill on time, you lose points on your credit score.  In order to help improve your credit score, some people advocate using cash to make purchases.  However, I find that since the invention of the debit card came along- this is just as good if not better.  The main idea is to avoid using your credit card(s) unless you know for a fact that you can pay the amount charged off right away. The purchasing decisions you make now may or may not affect you later in life if you’re not careful.

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