Why Good Credit Matters
Being judged by a number and not understanding what that number is for can be a scary prospect. The good news is that all you need to know about your credit score and how it is arrived at can be found online.
The most important thing you should know is what a credit score is, and what it is used for.
Basically, your credit score is tallied using a formula that scrutinizes your payment history, the total amounts you owe, the length of your credit history, the type of credit you are using, and any new credit you apply for. A formula is employed by the financial institutions to arrive at the big number, and this sum is listed by the three major credit bureaus (Experian, Equifax, and Trans Union). The outcome is then used to determine your viability as a lender, among other things.
What may shock you is how many other things in your life are shaped by your credit score. Among these are:
1. Finding a Home
- Securing a mortgage
can go with few, if any, complications if you have a good credit score. But you may not know that even landlords have the right to check out your credit rating to verify your fitness as a tenant. He will want to be sure that you pay your bills regularly and on time, among other things.
2. Getting a Car
- Just like obtaining a mortgage, buying a car with a car loan requires you to have a good credit score. Otherwise, you may lose the chance to get that dream ride.
3. Starting or Expanding a Business
- Any business, big or small, requires capital, and it is normal to try start or expand one by acquiring a loan from a bank or other financial institutions. Guess what they’ll use to decide if they’ll extend credit to you? Your credit rating, of course.
Are you starting to catch on to the theme here? Here are two more seemingly unlikely things that are guided by your credit score:
4. Finding a Job
- It may seem weird to you that your prospective employer may want to look up your credit score, but many do. The logic behind this is that how you handle your finances can be seen as a reflection of how responsible and reliable you are when it comes to your job.
5. Other Products and Services
- Necessities such as electricity, water, and other utilities need to be taken care of monthly, and so these companies will want to check your credit score out to see what kind of client you are. Other services such as cable, internet, and even your cellphone provider will also do a credit check prior to signing off on your application. Of course, let’s not forget the matter of getting a credit card. Your application and your potential credit limit hinge upon your credit score.
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