The function of credit scores are to assign a level of risk to you as a debtor or potential debtor, so that any potential creditor can have a certain level of confidence about any application for credit that you make. The creditor then use that credit score to determine what they are prepared to loan to you, what the interest rate will be on that loan and what payment plan they are prepared to accept.
If you’re somebody who has never had any debt before, any creditor who looks for your credit score will view you as a bit of a non-entity, and will likely refuse you any credit, particularly for big amounts of money like with a mortgage. To build your credit score in this situation is usually done by getting a small line of credit through a bank overdraft and/or a credit card, although this can take a few years so it is good to start as early as possible.
A credit rating is all important because you need a good credit score to get any help financing something, whether that be a new business, a new home, a new car or anything else. Some employers will even look at a potential employee’s credit score in order to get an idea of how trust worthy an individual is.
Because credit scores are very important, a lot of people like to have the opportunity to monitor their credit rating. In order to find out your credit score, you’ll need to sign up for a subscription with a company like experian, who use the same equation as creditors to figure out your score. Knowing this can allow you to systematically go about improving your stature with creditors, which is going to make building trust significantly easier.