Maintaining a good credit score is important, but why does it matter? How can a three-digit number be so important? The reality is that credit ratings affect anyone who uses credit, whether in the form of a credit card, loan, or line of credit. And this means that credit ratings affect most people. Keep reading to discover three main reasons why credit scores are important.
Your credit score can impact where you live
Before you can purchase a home, mortgage lenders will assess the odds of you defaulting on your mortgage. The way they will do this is by checking your credit score. If you have a low credit rating, the lender will assume you are a risk and will be less likely to grant you the loan. And for those lenders who are willing to approve your mortgage, you’ll likely be paying a higher interest rate. Interest rates directly impact your monthly mortgage payment. The higher they are, the more your monthly payments will be. Therefore, a low credit score can result in less money in your pocket. Even if you’re not looking to buy a house right now, your credit still matters. First, developing a credit history takes time, so it’s best to start early. Second, credit ratings may be just as relevant to renters as they are to buyers. Nowadays, it’s not uncommon for landlords to check your credit score when deciding whether to approve a rental application. To give yourself the best chances of being able to live where you want to live, it’s important to maintain a good credit score.
Your credit score can impact your job
Credit checks may also be conducted by employers. Many employers do credit checks as part of the hiring process. Credit ratings are a good indication of someone’s general level of responsibility. For this reason, employers may find them useful when assessing whether someone will be a good employee. In extreme cases, an employer may find that they are uncomfortable with the information they uncovered on your credit report, ultimately deciding not to offer you the job. As you can see, credit ratings matter and a poor credit rating could limit your job prospects.
Your credit score can affect your ability to take out loans
Finally, credit ratings impact one’s ability to take out loans. Whether you’re applying for a mortgage or a loan for your small business, lenders will be more likely to reject your application if you have a poor credit rating. Loans are essential to living a comfortable life for many people. Without help from loans, a person might not be able to start a new business, pay for a university education, or buy a house.
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