Your credit score will affect your dreams: think your home, job and personal finance. By definition, credit score refers to a statistical number which is used to evaluate a consumer’s creditworthiness. The number depends on your credit history. It ranges from 300 to 850, and it evaluates an individual’s ability to repay their debts.
Looking at your credit history, your credit history is calculated by taking into account elements like the amounts owed, number and types of your credit accounts, amount of available credit already used, how old the account is, and if you pay your bills on time. Recent credit queries matter too. Sounds serious, right? Below is a detailed breakdown of why you need to review and pay attention to your FICO credit score.
It determines whether you qualify for a loan or not
A lender will review your financial history before they consider extending you a personal loan, an auto loan, or a mortgage. Your income will also be reviewed other than your credit history and your credit score.
With a low credit score (bad credit), your loan application may fail. On the other hand, a high credit score (good credit) means you’ll qualify for better credit cards – or rather low-interest credit cards. Applying for credit cards with bad credit means that the credit card is only approved with high interest.
It affects your job(s) and housing
Employers and lessors are allowed a peek into your credit since your credit score measures your personal financial responsibility. Your employer may also pull your credit score to determine whether you are a good fit for the company or not. Like the unfiled tax returns Canada, bad credit will cost you in the long run.
Knowing your credit score and the effects of a poor credit will help you make sound financial decisions by encouraging financial responsibility. A good credit score shows that you are in control of your finances. You’ll also adopt healthier financial habits.
Protection from identity theft
Credit score monitoring ensures that all the items in your credit report are a result of your activities, not those of another. Since someone may take a loan or charge credit cards in your name, monitoring your score and asking for a credit report lets you know whether or not the report is accurate. Besides identity theft, checking the reports regularly will help you catch inaccurately entered data.
You may get lower interests on your loans
While it’s possible to get a loan with bad credit, you do that at the expense of a high-interest loan. Checking your scores keeps you in the know regarding what you can qualify for.
It affects your insurance as well
Your credit score affects the insurance policies you take the same way it affects your access to cheaper loans. With poor credit, you will pay higher premiums that you do when you have a high credit score. Note, however, that some states are against the use of credit score to determine the insurance premiums you pay.
Lastly, you should check your credit score to prevent a potential financial crisis, while allowing you access to more financial opportunities.