A good credit score is important for anyone to have. Loans are a necessary part of life for most of us. Building a solid credit history and maintaining a high credit score can have a dramatic impact on your quality of life now and in the future when you're considering applying for a loan or even a prepaid debit card.
Buying a House
Purchasing a house is one of the greatest investments you can make in your own future. It’s also one of the most difficult ones to achieve if you don’t have a good credit score. The recession caused foreclosures and short sales aplenty. Even though the housing market has rebounded, banks are still cautious about lending, with more stringent requirements than ever to qualify for a loan.
If you’re not ready to buy a home, it is important to know that renting a home involves a credit check for most people now. If you show delinquent credit, you may not be able to rent a house or apartment, or you may have to pay a larger deposit.
Buying a Car
This is a common purchase, and many Americans take out loans when they buy a vehicle. Car loans are much smaller than house loans, so they’re typically easier to get with a poor credit score. However, a poor credit score will only qualify you for high interest rates and a larger down payment on a vehicle. This can mean you pay thousands more for the same car compared to someone with good credit.
After you buy that new car, you will need an auto insurance policy. Almost all insurance companies now factor your credit score when calculating your premium payments, so good credit will save you money on this part as well.
Starting a Business
If you’re thinking about starting a business and need a business loan, your credit score and history will factor into your eligibility for small business financing. Regardless of whether you’re starting a business from scratch or trying to get the funds to expand, your individual credit score will affect your ability to get a loan for your business.
Getting a Job
Many employers are now running credit checks on prospective employees prior to hiring them. This is especially common in the government and financial sectors. A negative score or history could potentially keep you from being hired.
Getting Lower Interest Rates
While a good credit score is an important factor in obtaining any type of financial assistance, many banks are still willing to give loans to individuals with poor credit. If your credit is damaged, you will have to provide more documentation for your loan. You will most likely be hit with a higher interest rate as well. This is how financial institutions outweigh the risk of giving you money.
If you want better interest rates to save yourself money in the long run, keep that credit score high. Work to repair your credit score by making house and car payments on time, paying off loans before the end of the loan period, and paying off your credit card in full each month.