Today’s society is dependent on loans for purchases and other financial transactions. So nowaday’s you need good credit for a lot more than getting a loan or credit card. In the age of technology, these show your ability make payments. Plus, you can get a free credit report on yourself every year and keep tabs on how your reports and scores look.
However, many people have overextended themselves and cannot repay their debts. That has wrecked a lot of credit scores. Since your credit is so important, you need a credit builder to keep improving your score. Here are 5 reasons why you should work on improving your credit score.
It Can Impact Your Housing Options
Before you buy a house, your lender will need to see that you will pay back the loan. When you don’t have good credit, your mortgage company could consider it too risky. On top of that, your credit score affects the interest rate on your mortgage. That means they impact the amount you pay each month. So lower credit scores can cause your application for a loan to be declined or leave you with higher interest rates and monthly payments.
Even if you’re not looking to purchase a house, credit can still affect where you live. For example, your landlord can use your credit score to decide if they want you as a tenant or not. They can do this because property rentals are considered a loan and the owners want to make sure they are going to get paid.
Even if a landlord decides to accept you as a tenant, your credit score may affect how much you need to put down as a security deposit, or it may make the difference between paying the first month’s rent only, or both the first and last month’s rent! Those costs can add up very quickly!
It Can Get You an Auto Loan
Most people can’t pay cash for a vehicle due to the rest of their living expenses. That means they will apply for a car loan. Your interest rate, maximum amount, and whether you are even qualified at all are based on your credit. In general, the better your credit is, the more money you can borrow and the lower your interest rates will be.
Lower credit scores will reduce your choices when it comes to cars. Fewer loan companies will lend to you when you have poor credit. If you find a company, you will have higher interest rates which will raise your monthly payments and the amount you owe the company back.
The truth is, if you have bad credit, then you’ll likely not qualify for a large enough loan to buy a brand new car. If you know that you’ll want a brand new car, or a more luxurious used car, then you need to start working actively to improve your credit score now.
Additionally, by improving your credit score, you’ll get a more favorable interest rate which means you’ll pay less interest over the life of the loan. I’m pretty sure you like the idea of paying less money, right?
It Can Prevent You From Getting Employment
Many employers run your credit reports and scores before hiring you. If they see that you have not been financially responsible in the past, they may not want you working for them. For example, a potential employer may decide that the salary of the position you are applying for is not adequate to cover the amount of debt you have, meaning you’re more likely to leave the company quicker.
On the other hand, if you have good credit, it will signal to a potential employer that you are financially responsible and will be an asset to their company. This is especially true for financial institutions. When I worked for one of the world’s largest banks, they required all employees to be sensible with their money. I even had to have every personal stock purchase approved by the bank before I could buy it!
It Can Get You a Business Loan
A lot of people want to start a business. However, this process takes a good amount of money that most people don’t keep on hand. Therefore, those who want the dream bad enough take out business loans. That said, you can only get one of these loans if you have good credit.
If you have poor credit or no credit at all, you are out of luck. It is harder to get a loan in this situation. It doesn’t matter that you are a well-meaning person with only good intentions and a great business idea. If your credit history says otherwise, that is all the bank can trust.
It Can Help With Your Living Expenses
While it may sound shocking, you need good credit to start getting utilities. That is because electric companies claim that you are borrowing a month’s worth of electricity at a time. Therefore, they will see what your credit looks like before turning your power on. Aside from this, many other utility providers conduct credit checks, such as cell phone, water, telephone, and cable companies.
Employers, utility providers, lenders, and landlords often use your credit score to make an educated guess about how financially responsible you will be in the future. Since your credit score can affect so many aspects of your life, it makes sense to improve it.
It isn’t because these businesses have it out for you. They’re all taking risks because they don’t know you well personally. They use these credit scores as a way to help reduce their risk. All you need to do is improve your score and enjoy the benefits!
