Just How Important is your Credit Score?
In general, society has become increasingly dependent on the use of credit to make purchases and provide information to various lending institutions regarding financial decisions that need to be made. These days, a good credit score is needed for far more than just obtaining a credit card – it also demonstrates your history of repaying debts to any entities that you’ve borrowed money from.
Here are some reasons why it’s crucial to maintain the highest possible credit score:
It will affect where you Live
Before you’ll be able to obtain a mortgage, lends will want confirmation that you’ll be able to repay them. If your credit score is low, many lenders will decline a loan application because you’ll be considered as a high risk for defaulting on payments.
If you’re approved for a mortgage, your credit score will affect the interest rate on it as well – the higher your score, the lower your interest rate will be. Landlords now also take a person’s credit score into account to determine whether you’ll be a suitable tenant or not.
It will affect the Car you Drive
Most individuals simply don’t have the financial means to cover the cost of buying a vehicle outright and still paying rent or mortgage installments, meaning that they’ll apply for an auto loan at some point. Your credit score will affect whether you’ll qualify for an auto loan, the amount you are eligible to borrow and the interest rate you’ll pay on installments.
A low credit score will not only make it more difficult to obtain an auto loan; being charged a higher interest rate on your loan also means that it will cost you far more to repay over time.
It Affects Living Expenses
Believe it or not, a good credit score will also be required when the time comes to establish utility services in your home. Electric companies for instance will state that you’re effectively borrowing your first month of electricity, so they will check your credit score to determine whether you’re a low or high risk customer. The same principle will often also apply to phone, water, internet and cell service providers nowadays.
Tips to Manage your Credit Score
- Pay on Time
Your payment record has a major influence on your credit score – even paying one credit card installment a few days late will pull your score down.
- Reduce the Amount you owe
Use your credit report to see how much debt you have and arrange them from smallest to largest amounts, or alternatively, according to interest rates that are being charged on them. Work through your list by paying off those with the smallest balances or highest interest rates first.
Ensuring that you keep your credit score as high as possible will help ensure that you’ll be able to obtain the best possible interest rates if the need ever arises to apply for a mortgage or auto loan, or move into a better neighborhood.