The Importance Of A High Credit Score

Last week, investing port shared an article on how you can improve your credit score; this week, we would be looking at the importance of having a high credit score.

A credit score is a form of report that tells lenders about a person's creditworthiness. It is a number that summarizes credit risk, based on a snapshot of a credit report at a particular point in time. The credit score is calculated using the information in an individual's credit report and is used by a majority of top lenders.

·      High credit scores lowers mortgage interest rates

In the process of requesting for a mortgage loan, mortgage lenders would always want to weigh their options to know if you would default on your mortgage or not.

Your credit affects your interest rate since interest rates could directly impact your monthly mortgage payment, by either increasing or decreasing the amount you are charged. Low credit scores will cause a loan application to be disapproved, or approved at a higher rate. Even though you may not be interested in getting a house, your credit is important because some landlords use your credit to decide if renting out a house to you would be ideal.

·      Good Credit Determines if you get business loans

Many individuals have dreams of starting up personal businesses, which often requires some specific amount of money which may not be available at a particular time, thus requiring business loans. In order to qualify for such loans, you need a good credit score.

·      Your credit score can impact your insurance premiums.

Some states prevent insurers from using your credit score for certain insurance premiums, while many other states allow it. With a lower score, you could end up paying more each month for coverage. However, you could pay hundreds of dollars less in insurance premiums over your lifetime by improving your creditworthiness and positively impacting your credit score.

·      High Credit scores can decide your suitability for a job

Hiring managers often conduct credit checks as part of the hiring process, and an individual's chances can be limited if some level of financial responsibility has not been demonstrated. Some other employers could go through an employee's credit score before a promotion is granted especially for financial and executive positions.

·      High credit scores increases your access to better financial deals.

With good credit, you would have access to better financial deals and opportunities. You may be able to refinance your home to a lower interest rate; you might have access to better rewards credit cards with lower interest rates, and you might even be offered checking accounts, investment accounts, and credit cards with signing bonuses. Having access to these financial deals may help you better manage your resources in the long run.

·      High Credit Scores could facilitate automatic loans

Funding a vehicle and living expenses at the same time could be quite difficult for some individuals. Many will apply for an auto loan of which your credit rating would decide if you are qualified, the amount you can receive, and the interest rate of the loan. Generally, loan applicants with a higher credit score often qualify for larger amounts of loan with lower interest rates, while lower credit scores limits the chances of an individual.