Why is Credit Score So Important!
You can’t watch TV or spend any amount of time on the internet without running across an ad that tells you how to get your free credit score. These ads may touch on the importance of having a good score, but they don’t really go into any detail about what might happen if your score is not as high as it should be. Most people just believe that they will have a hard time getting a credit card from their local superstore, but the implications of a bad credit score can run much deeper than that. They may in fact have some serious effects on your financial future.
One of the dreams that most people have when they reach adulthood is to own a home of their own. That is not something that you can generally do right out of college, which mean years can pass until you are ready to take the leap into home ownership. During those years, the way you maintain your finances can have an impact on your ability to get a mortgage, as well as the interest rate that you will have to pay. Before we get into some detail about the problems you might face, let’s first look at what can damage your credit score.
One of the biggest factors that goes into calculating your credit score is how timely you have been in paying your debts. That includes such things as rent, utilities, and credit card or other loan payments. Missing a payment or two may not seem big in the grand scheme of things, but it can have a very negative effect on your credit rating. If your dream is to own a home, you need to pay bills on time, and keep your debt level to a bare minimum. Failing to do so can see your score drop dramatically.
Mortgage companies and financial institutions will look at all three of your credit scores to get an idea of how big a risk they are taking by presenting you with a mortgage. You should know that as soon as your credit score drops below 740, your chances of being approved drop with it. Staying close to that number will mean that you should be able to secure a loan, but you are not going to get the same interest rates as those who are up closer to 800. A higher interest rate means potentially paying tens of thousands of dollars more during the period your mortgage has been taken out over.
Applying for a mortgage is just one area of your finances where your credit score will come into play. Insurance companies do more than just look at your age and health records, they also look at your credit score when determining how much they are prepared to insure you for. The fact is that your credit score has an impact in more parts of your life than you might ever have imagined, and that includes your ability to land a job. Knowing where your score sits is great, but knowing the impact it can have on your financial future is much more important.
Benefits of having a good credit score
There are lots of benefits you will get from a good credit score. Once you know exactly what these benefits are, you would be focused to always keep your credit score at the its best or if you don't have a good score to get motivated to make improvements to your own bad credit rating.
With a good credit score, you will:
Benefit from Lower Interest Rates on Loans and Mortgage
If you are borrowing money, one of the most important factors to consider is the rate of interest. The offered or eligibleinterest rate will always depend upon your credit rating or credit score. A very good score enables you to enjoy the best given rates so that you can qualify for lower payments on your loans, mortgage or credit cards .
Have Better Chances on Loan and Credit Card Approval
If you think that your credit score is on the rocks, applying for a loan or perhaps a new credit card is probably not the best idea. Poor credit score in most cases influences a loan, or credit card application to be rejected. Even though other factors such as amount of your income and also the number of outstanding debts or loans are taken into consideration in granting a new loan, a very good credit score will greatly increase your chances. If your credit score is satisfactory, you can confidently apply for a loan or perhaps a credit card, since you can probably guess the outcome.
Negotiate Better Payments or Lower Rates with Confidence
Applications for a credit loan or perhaps a new account of credit card usually entails bargaining. Once you know you have an excellent credit history, you may use it as your own ace in bargaining for a reduced interest rates. Additionally, in case you have already obtained other similar financial benefits from other companies or lenders as a result of your good credit, then you may even use that as your bargaining tool. But assuming your credit score is low, you can not quite easily bargain with creditors in order to lower payments or interest rates therefore you would have more limited choices and opportunities.
Be Offered Higher Limits
Your credit history as well as income are major factors and effect your lending capability. A good credit score will give banks and lenders confidence in extending you further borrowing ability. This is because you have actually proven you to be a reliable consumer who pays your payments regularly and on time. You may find a lender who will extend you credit card or a loan based on your poor credit history, but the amount of loan or credit limit will be much lower based on your bad credit score.
Readily Get Approval on Rentals
Another important benefit of good credit score is to help you in renting an apartment or a dwelling. Tenants are generally screened by landlords just like a lender since they are looking for renters who will pay their rent regularly and on time. You are likely to be rejected from renting a house or apartment in the event that your credit score is bad, especially if the root cause is an outstanding charge or failure to pay rent or installment. But , if your own credit history is excellent shape, you will easily be accepted for an apartment or home rental.
Better Vehicle Insurance Rates
Insurance firms realize that people who have a bad credit score usually are higher risk not only for payments but sometimes for filing insurance claims. In case you have a bad credit score , be prepared to pay higher premium on your car insurance coverage v.s a better or lower rate iif your credit score is high and you have good credit rating.