Most of you might not realize it but your credit score affects the major decisions of your life. A credit score isn’t just an assessment of your financial situation, it also affects where you live and your job status.
What’s a Credit Score?
The Fair Isaac Corporation (FICO) scores your credit rating based on your past credit dealings. A good credit past means a good credit score. A credit score tells your creditors how risky you are. A good score makes you trustworthy with the people who you are going to be dealing with in the future. If you have a public record, it will also be factored into your credit score. Fortunately, you can have it removed from your credit score.
Read More: How to Get a Public Record Removed from Your Credit Report
What’s a Good Credit Score?
Banks score your credit position between 300 and 850. The average American has a credit score between 600 and 750. A score of above 800 is considered to be excellent. A credit score above 700 is generally considered good. A score below 300 is usually poor and might mean problems for your later on.
Why Do I Need A Good Credit Score
A Credit Score, if it’s good, can affect your lifestyle. You can lead a happier, less-stressful life with a good credit score because it helps you with:
Getting Your Dream Home
If you have set your eyes on a dream home, you might be in need of a mortgage. The first thing a creditor will look at when you submit your application is your credit score. He will be more willing to extend the loan with a good credit score. Your application will be approved in the first go. You can take your choice of home, in any neighborhood that you like.
A low credit score makes it infinitely more difficult to get a loan. Your interest and your premium would be higher in that case. Plus, you might have problems getting approval for the entire amount of the loan. That means getting a smaller home or a home in a different neighborhood.
If you are going to own a home, or own a car, you need insurance. You might even be in the market for a health or life insurance. Your credit score will have a big impact on your insurance premium. That’s because your credit score determines how risky you are.
The lower the credit score, the higher the risk score. A higher risk score potentially means you might need more coverage for accidents and damages. To cover their base, your insurance provider will consider your credit score before determining your insurance premium.
Student loans are one of the biggest loans the average college student takes out in America. They can range from $20,000 to $36,350 and even more, depending on the state.
If you have been paying back those loans on time, this means you have a good credit score. With a good credit score, you can request your creditor to lower your interest rate. Many students consolidate their loans after they have a stable income and a good credit score. This means you can get your interest rate down by more than 3% and save up to $60,000 in loan payments over life.
Getting a Credit Card
A credit card is one of the safest ways to shop online. It bails you out in emergency situations. With a credit card, you can even get discounts and loyalty points at your favorite store. Even if you don’t really need a credit card, having it on hand can be quite useful.
A credit card not only improves your chances of getting a loan, it also improves your credit score. Many banks would be unwilling to offer you a good credit card if you have a low credit score.
Every bank has a tier when it comes to credit cards. Banks usually offer Gold and Platinum cards to people with a good credit score. These cards have lower interest rate and a higher credit cap.
Landing a Great Job
Many employers nowadays conduct credit checks on their prospective employees before hiring. If you have a low credit score, they might think that hiring you can be risky for the business. Even during promotions, some companies conduct credit checks to evaluate the financial stability of their employee.
Your Financial Situation
Considering all the point above, I’m sure you already understand how a good credit score affects your financial situation. With a good credit score, you will be paying lower interest rates and saving more money in the process. You probably have a better job, if your credit score is good. Your overall financial position is much better with a good credit score.
If you want to evaluate your credit scores, you can request a free copy of your credit report from any of the four credit assessment companies in the US.
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