Have you ever wondered why credit scores are so important? Everyone seems to be talking about the importance of having a high credit score, but what is it that makes a high credit score so necessary? The questions seem to be overwhelming, but thankfully, there are answers.
We at CRS are here to explain the importance and implications of credit scores to you today. CRS, which offers credit report services for business, is a certified full-service credit reporting agency. If you are an individual wondering about the quality of your credit score, a business needing to take out a business loan, or anything in between, keep reading to learn more about why it’s important to keep your credit score high.
What is a Credit Score?
A credit score is a number that predicts how likely one is to pay back debt on time. A variety of information from your credit report is combined and calculated to create your credit score, such as the time it took you to pay back your loan and the amount of money you loaned out, among other things.
Credit scores typically range from around 300 to 850. Positive outcomes in areas such as bills and repaying loans on time result in higher credit scores. If you pay back your credit in full and on time and are up-to-date with your mortgage and auto loan, then you are more likely to have a credit score closer to 800. However, if you don’t pay back your credit card on time and are not good at keeping up with your utility bills, your credit score might be closer to the 400s or 500s.
Why is Credit Score Important?
Credit score is important because it has the ability to affect nearly every financial decision you make. From loans for a business to applying for credit cards, every financial endeavor will be informed by your credit score. When applying for a loan, your bank will notice whether you have a high or low credit score and base the decision of granting you a loan on your credit score.
A high or low credit score has immense implications for every area of your life. Let’s get into a few of the many things that are affected by your credit score.
Auto Loans
Are you thinking about buying a new car? If so, double-check your credit score before you go to the auto dealer. Your credit score can impact the price your pay for your car substantially. It doesn’t necessarily affect the face-value cost of the car, but it will without a doubt have an impact on your car loan. If you have a lower credit score, you may not qualify for a car loan at all. Many car dealers do not accept customers with too low of a credit score. If your credit score is high enough to get you an auto loan but is still within the lower range of credit scores, you will have higher interest rates than customers with high credit scores. This extra interest is added so that auto companies have a sort of financial safety net since a low credit score indicates that you can’t be trusted financially. High interest can add up to a whole lot of money over time, so maintaining a high credit score by paying everything off on time will help you acquire an auto loan at a reasonable price.
Business Loans
It takes a lot of money to run a business, hence the necessity to be able to take out a business loan. Similar to auto loans but perhaps more important, the chances of you acquiring a business loan are affected by the quality of your credit score. Banks want to make sure that you will be responsible in paying them back, and the higher your credit score is, the more likely you are to pay them back in full and on time. If you are interested in taking out a business loan, then make sure you consult with credit report services for businesses, which can help you prepare for taking out a business loan.
Employment
Any other endeavor that would require a loan (such as credit cards, mortgages, etc.) also demands a good credit score. Another area in which credit score has major implications is employment. When running background checks, employers often look at your credit score because a credit score says a lot about a person. How can employers expect someone to be responsible in their position if they have a credit score in the 300s? Make sure to keep your credit score in the high range, especially when applying for a new job.
Credit scores are immensely important and have implications in many different areas. If you want to learn more about credit scores and see what yours is, make sure to check out the CRS credit report service for businesses. Not only will you be able to learn your credit score, but you’ll also learn how to raise it to the high credit score range and keep it there.
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