Did you know your Credit Score could be what’s holding you back from reaching your financial goals in life? YES, your credit score could OPEN new doors for you (but it can also close them for the next 7 years if you make the wrong moves too)! So If you don’t know why having an Excellent, vs Good, Bad, or Poor Credit Score should be a concern for you, here are some reasons why a credit score is important:
- Loan Approval
- Interest Rates
- Credit Card Approval and Limits
- Renting a Home or Apartment
- Insurance Premiums
- Employment Opportunities
- Deposits & Down Payments
- Security Deposits for Services
- Financial Opportunities
- Financial Health
What is a “Credit Score”
A credit score is a numerical representation of an individual’s creditworthiness and is used by lenders, such as banks and credit card companies, to assess the risk of lending money or extending credit to that individual. FICO scores range from 300 to 850. Equifax, TransUnion, and Experian are the most frequently used Credit Bureaus. But there are lots of 3rd Party Companies with Websites and Apps to help you keep track of your credit score i.e. CreditKarma
Factors used to calculate your credit score include repayment history, types of loans, length of credit history, debt utilization, and whether you’ve applied for new accounts.
Reasons why a credit score is important:
1. Loan Approval
Lenders use credit scores to evaluate the likelihood that a borrower will repay a loan on time. Having a higher credit score indicates a lower risk to the lender making it more likely for you to be approved for loans or credit.
2. Interest Rates
A good credit score can result in lower interest rates on loans and credit cards. Lenders reward individuals with higher credit scores by offering more favorable terms, saving them money over the life of the loan.
3. Credit Card Approval and Limits
Credit card companies use credit scores to determine whether to approve a credit card application and what credit limit to assign. A higher credit score may lead to better credit card options and higher credit limits.
4. Renting a Home or Apartment
Landlords often check the credit scores of potential tenants to assess their financial responsibility. A higher credit score may make it easier to secure a rental property.
5. Insurance Premiums
In some cases, insurance companies may use credit scores to determine premiums for auto and homeowners insurance. A good credit score may result in lower insurance costs. A Bad score could cause you NOT to be approved at all! Or might just mean you pay more over time. But, many other factors are used by insurance companies too!
6. Employment Opportunities
Some employers may check the credit history of job applicants, especially for positions that involve financial responsibilities. While this practice is more common in certain industries, a good credit score can positively impact employment prospects. After working in the Financial, accounting, and Investment Industries for many years it was almost a given that you not only have to pass a Credit Check to get hired, but sometimes companies could pull your Credit at any time during your employment in some of the positions I was in – we had to fill out paperwork every year!
Story: I had to run my credit for several jobs I applied for. Once, I applied to drive for Uber and they declined to hire me after running a background and credit check! I don’t remember 100% the reason, but I was SHOCKED because I had a pretty GOOD Credit Score at the time and knew several others who had BAD Credit who all had Jobs with the rideshare company. And, I haven’t had anything on my background (that I know of since I was probably a teenager technically a kid).
7. Deposits & Down Payments
When setting up utilities, such as electricity or water, utility companies may check credit scores to determine whether a deposit is required. A higher credit score may help avoid or reduce the amount of the deposit. The same goes for auto loans down payments as well. Not just are you approved but how much do you owe upfront!
8. Security Deposits for Services
Some service providers, like cable or internet companies, may use credit scores to assess the need for security deposits before providing services. Also, the reason why smaller, monthly, pay-in-advance carriers started popping up over time!
9. Financial Opportunities
A good credit score opens up opportunities for better financial products and services, such as premium credit cards with rewards, favorable terms on personal loans, and other financial perks.
10. Financial Health
Monitoring your credit score can also serve as an indicator of your overall financial health. It provides insights into your credit management habits and encourages responsible financial behavior.
Let’s Review
Here are some reasons why a credit score is important:
- Loan Approval
- Interest Rates
- Credit Card Approval and Limits
- Renting a Home or Apartment
- Insurance Premiums
- Employment Opportunities
- Deposits & Down Payments
- Security Deposits for Services
- Financial Opportunities
- Financial Health
In summary, a credit score plays a crucial role in various financial aspects of an individual’s life, affecting their ability to borrow, the cost of borrowing, and even certain non-financial aspects such as renting a home or securing certain jobs. Individuals need to be aware of their credit score and take steps to maintain or improve it over time.
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About Me:
Hi, if we haven’t officially met I’m Blogging Brandi and this is my Money Blog! I am an ex-corporate Kool-Aid Drinker, Born to be a Blogger, Creator, and Entrepreneur. I also LOVE my dogs and RV a lot! Plus, I have a background in Accounting, Investments, and a Finance Degree! So, I kinda, maybe, sorta, might know a thing about money! Check out the About Page for all the details! 😉
P.S. Got Questions? I’ve got answers reach out via [email protected] (or using the form on my Contact Page).
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Hi, if we haven’t officially met I’m Blogging Brandi and this is my Money Blog! I am an ex-corporate Kool-Aid Drinker, Born to be a Blogger, Creator, and Entrepreneur. I also LOVE my dogs and RV a lot! Plus, I have a background in Accounting, Investments, and a Finance Degree! So, I kinda, maybe, sorta, might know a thing about money! Check out the About Page for all the details! 😉