Just like you must save for retirement and put away money from each paycheck, you should check your credit regularly. Credit scores are an essential component of your overall financial health and can significantly impact all aspects of your life. Whether or not you agree with the logic, having a high score demonstrates to lenders, landlords and potential employers that you are sensible, stable and dependable. Having a solid credit score can help you access loans with favorable terms, qualify for a new apartment and pass an employment credit check. Read on to find out why you should take credit score importance seriously.
Understanding Credit Score Ranges
First, you should understand what impacts your credit score and the different credit score ranges. Several companies produce credit scores based on various factors, but lenders most commonly use your FICO credit score. FICO scores range from 300 and 850, with several factors determine your score. These five factors are payment history, amount of debt, length of credit history, credit mix, and amount of new credit. Your payment history and the amount you owe are the two most significant factors.
TransUnion, Equifax, and Experian are the three major credit bureaus that track consumer credit information and produce FICO scores. An excellent credit score is a FICO rating between 800 and 850. A very good score is a rating between 740 and 799 and a good score is considered between 670 and 739. Fair scores fall between 580 and 699.
Credit Scores Can Impact Where You Live
It should not be a surprise that mortgage lenders look at applicants’ credit scores before approving loan requests. If the lender approves you for a mortgage, you must have an excellent or very good credit rating to get the best interest rate. These rates impact the amount you pay in interest over the life of the loan. Having a low-interest rate can save you thousands over the life of a 30-year mortgage. Low scores can disqualify you from receiving a mortgage or you can be approved with a high interest rate.
Many landlords check the credit of renters, too. Many large apartment buildings require a particular credit score even to apply and you could be rejected if you have a collections account, an eviction or late payments on your profile. If you have poor credit, it can be challenging to find a landlord willing to work with you.
Car Loans Require Good Credit
If you are like most people, you don’t have the funds to pay cash for a vehicle. Most people have to apply for auto financing. Your credit rating impacts whether you are approved, your interest rate and the car you can purchase. Don’t expect to be approved for a luxury vehicle with a low interest rate if you have fair credit. Only consumers with very good or excellent credit will be approved for high loan amounts with low interest rates.
A low FICO score will limit your options when it comes to car buying. If you have a large family and need an expensive suburban, you will need a high credit score. Most lenders will outright reject low credit rating applicants, or you could be approved for a low loan amount with a high interest rate.
Certain Employers Conduct Credit Checks
Many employers check your credit history during the hiring process. You can expect an extensive credit history search if you want to work in the financial services industry. For example, a low credit score can disqualify you from employment as a loan officer, bank teller or financial advisor.
Other employers may check your level of debt to see if it is compatible with the salary offered. You may be rejected if your debt is too high for the salary range.
Entrepreneurs Need Good Credit
Many people dream of becoming an entrepreneur and running their own business. However, starting a business can be very expensive. Purchasing inventory and renting office space will require a sizeable amount of upfront cash. Most small business owners take out business loans to cover startup costs. If you don’t have a good credit rating, you will find it challenging to qualify for a business loan or line of credit.
Living Expenses Can Require Good Credit
Many utility companies, insurance corporations and cell phone providers require a credit check before setting up service. If you have poor credit, you could be rejected or you may have to pay a hefty security deposit.
Boost Your Credit With Coast Tradelines
Raising a poor credit score or establishing a favorable credit history is not easy. Coast Tradelines can help you boost your credit score in just a few weeks. Our process is simple. We facilitate the process of adding you as an authorized user on the credit card of a partner. Being added as an authorized user can boost your own score, making it possible to meet your financial goals quickly. Contact us today to start your credit journey.