Your credit score is more than just a number—it has the potential to greatly impact various aspects of your life. Without a good credit score, you may have fewer opportunities and pay far more money than your high-scoring counterparts. Essentially, your score can either open doors or it can close them. From landing the home of your dreams to getting hired for the job of your choice, these are some of the reasons why having good credit is important.
Starting a business
When you start or expand your own business, it’s often necessary to take out business loans to receive the financial support you need. Your ability to qualify for such financing is greatly impacted by your credit score and payment history. If your score is too low, your entrepreneurial dreams may be put on hold until you can boost your credit score up.
Lower interest rates
High interest rates can cost you a lot of money over time and they cause many people to get buried in debt. To score the lowest interest rates, it’s important to show lenders that they can trust you to pay back loans on time. Since your credit score is often viewed as a reflection of your financial responsibility, it will play a large role in helping you qualify for the best interest rates.
Getting a job
In certain states, employers can check your credit before hiring you by requesting a modified credit report from the credit bureaus. Having bad credit is often viewed as a lack of responsibility or financial management skills, so a low score is also unattractive to potential employers. While this practice is controversial, your poor score could decrease your chances of getting hired.
Buying a house
Buying a house is one of the most expensive purchases anyone makes, so most people take out a mortgage to help cover the cost. Without a good credit score, however, you may have trouble qualifying for one. If you do manage to get a mortgage without good credit, it will likely have bad terms and cost you a lot of money throughout the years. If you increase your credit score, you’ll have more room to negotiate better terms such as smaller monthly payments and better interest rates.
Purchasing a car
Owning a car is a necessity for many people to commute to work or to complete essential errands. To purchase this costly investment, many enlist the aid of a loan. If you have poor credit, your score won’t just impact your ability to acquire such a loan, it will also determine how high the interest rate is. Since fewer lenders are willing to lend to people with poor credit, your options will also be limited, which may result in less than ideal terms.
Fewer security deposits
Security deposits are sums of money that are held in trust by a service provider as a precaution in the case that a borrower breaks or violates the terms of agreement. If you have bad credit, you may need to pay security deposits on different payments—this includes your cell phone contract and your utilities. These deposits are often costly and inconvenient. To avoid them, it is essential to raise your credit score.