Your credit scores with the three major credit bureaus, Equifax, Experian and TransUnion can either be major leverage and help, or they can be a brick wall that make forward progress very difficult.
Understanding how your credit scores are calculated and what contributes to their rise and fall will play a huge role in your personal finances. Having high credit scores can unlock opportunities (like getting a good rate on a mortgage refinance from a company like Credible), while low scores can prevent you from living the life you want and end up costing you more money in the long run.
Why is there so much emphasis placed on these three scores? They tell potential lenders and other organizations and groups how responsible you are when it comes to finances, debt and repayment of that debt. While there are many reasons why you should make maintaining high credit scores a priority, here are some of the key reasons.
It Helps You Secure Low Interest Rates
Whether you are buying a car or a house, your credit scores determine if you will be approved for financing, and if so, what interest rate the lender is going to charge you. Those with high scores will receive more favorable rates because the risk of defaulting is lower.
Those with lower scores present a higher risk to the lender, so they will be charged a higher interest rate to borrow that money. “The amount of money saved over the course of 30 years on a mortgage just by locking in a rate one percent lower is shocking,” offers Chris Dziak of Pure Nootropics.
You Need a High Score for Home Ownership or Renting
While most know that their credit score determines whether or not they can get a mortgage, it also plays a role when it comes to renting or leasing an apartment. The same principle applies, as the landlord isn’t going to rent to someone with a shaky credit history or a payment history that is full of missed or late payments.
It doesn’t matter if you want to finance a boat or a pool from National Pool Fences. Any time you are applying for credit, regardless of the dollar amount, your credit is going to be looked at and evaluated and the score is going to determine the outcome of the loan application.
Many Employers Look at Your Credit Score
Did you know that many employers will also check your credit during the job application process? They do this to see if you are responsible or not, and someone that has good credit is going to be deemed more suitable for the position because they appear to be more balanced and have their life in order.
Now, situations happen and there are always exceptions, but for the most case a low score and bad credit can prevent you from getting a job, even if you are qualified for the position otherwise.
In an Emergency Situation it Can Give You Financial Leverage
What if your car broke down and you needed $1,200 to fix it? Could you take out a loan to get it fixed? What if you needed to handle a financial emergency and needed to apply for a credit card in order to do so. Would you be approved?
Sometimes you have to think of the unexpected and plan for it as well. “Having a high credit score enables you to take out loans or apply for financing when you least expect it,” says Henk Schipper of Jaloezieen Fabriek.