It’s become a practical necessity for many Americans to own a credit record and a corresponding credit score. Not only do you use credit for making your purchases, a credit record is also fundamental in helping you get access to various financing resources such as a mortgage or a car loan.
But how deeply could a three-digit number really affect your everyday, economic life? Why is keeping a healthy credit score so important? Let us count the ways.
Determines your housing budget
Majority of Americans don’t have the cash to pay for a house. That is why we go through the hassle of finding a lender, sorting out all the needed paperwork, and applying for a mortgage. Or, we look for a rental property that is affordable and within our budget.
But a big part of actually getting a home to settle into is your credit score. Both the lender and the landlord would want a reliable piece of assurance that you will not default on your housing payments. And the most fundamental, universally-accepted way to prove that is via your credit record.
If you have a good score, you are more likely to get approved. But if you don’t, you better find another option – that is, if you cannot find another alternative to prove your creditability. Your score sometimes also affects the loan amount you can borrow, and the interest that will be carried into your monthly mortgage payments.
So basically, a good score equals more affordable payments. The same goes with the rent.
Dictates what you drive
What is true for housing is also true for your car loan. If you don’t have the cash to pay it upfront, you need to find a lender who will let you borrow the money to buy the car. The lender looks at your score and if it is satisfactory, they will then dispense the money with a relatively manageable interest rate. If not, such as in the case of individuals with credit scores 620 and below, you might get denied, or be forced into the subprime market with soaring interest rates. If you have good credit, you get access to larger car loans, with better loan terms and options.
A vital consideration when starting a business
Most of the time, it’s not easy to get your ideas out there. You need money to transform your brilliance into a revenue-producing effort. That is why many entrepreneurs seek business funding via small business loans to get their own projects started. But then again, getting approved for such requires having good credit. Business loans usually have stricter requirements so when it comes to having a score below what’s considered prime, you are most likely to pass through a needle point to get the money needed.
Bills, bills, bills!
Most utility services now entail showing your provider a good credit score. That includes all your basic daily necessities that won’t be provided unless you can prove to the providers that you are a responsible payor.
A career requirement
Although not universal, many employers hesitate to hire candidates or applicants without an established credit score. Your score could also be the basis for salary offers and promotions.
As you see, having a credit score – and a good one at that – is an integral part of the American way of life today. Establish good credit habits, pay your bills and dues on time, and regularly check your record for errors. Being proactive in your credit info will help you ensure you’re ready for when you need it the most.