The power of your credit score over your financial goals

Aug 14, 2020

Why should you pay attention to your credit score

Credit scores may seem like simple numbers, but they reign over so many things in the financial industry. This detail of your life is the representation of how well you can handle money and how much you can be trusted with. It serves as the basis for many financial institutions on their assessment if they will be willing to lend you money.

Your credit score is a set of numbers that are generated specifically for risk assessment. It is assigned to a person based on their ability to pay a loan, should they be approved of one. So, the higher your score, the better your financial options will be. Having lower scores might mean that you won’t be able to qualify for loans at all.

If you think about it, your credit score is so powerful that it has strong control over your life. It can dictate your ability to have a better life, like your access to getting a new car or a new house. Most of all, your credit score has a strong influence on your personal finances.

Having said that general reason to monitor your credit, there are many other reasons why you should pay attention to your credit score.

1. Your credit score is vital for purchasing a new home.

Do you have a dream house in your mind? Are you sick of renting or living with your parents? Moving out would require acquiring a house loan. To gain access to this, you have a better credit score to gain access to a better home.

2. You can suffer from a negative hit on your credit report.

Credit scores and reports can suffer from drips and drops when you have not been caring for your finances. This means that you should not miss a deadline on your bills and loan payments. Any time you fail to make a payment, your score will be decreased, that’s why you should monitor your credit report closely.

Another aspect that might hurt your credit report is an error or identity theft. It’s something that nobody wants to happen, but there is still a possibility that it will. When you see wrong information on your credit report, especially involving things that take a bad hit on your credit, you can dispute this matter from the credit bureaus and have your credit rating back to its normal score.

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3. Your credit score can get you better insurance.

Whether you are interested in acquiring car insurance, health insurance, life insurance, or home insurance, you should wait to check on your credit score first. Why is that? When your credit rating is lower, you might get higher monthly insurance premiums. Just like banking and lending institutions, insurance companies look at your past insurance history and other items on your credit report to assess the right rates for you.

4. Higher credit scores mean better credit cards.

Nowadays, there’s a credit card for everything – including varying stages of a credit score. It has also become an essential financial tool, especially now that there is a boom for online shopping and e-commerce. So, the better your credit rating, the better type of credit card you can get. Aside from a larger credit limit, you can get bonuses like miles, cashback, deals, vouchers, lower fees, and other perks with a good to excellent credit score.

5. A good credit score means you can qualify a loan.

One of the most essential advantages of keeping your credit at a good level is qualifying for a loan. Before lending companies extend to you access to a credit line, they check on your credit history first. It is just not dependent on how much you earn every month, your credit behavior is also studied here, as well.

Whether you are in need of a personal loan, a mortgage, a fast loan, a franchise loan, or other similar forms of credit, there is a risk for you to be rejected if your credit is too low. It might do you well to build your credit first before pursuing this endeavor.

6. Higher credit scores mean lower interest rates.

Aside from getting a loan in the first place, creditors also assess the interest rates they will assign to you. The easiest way to understand it is that better credit scores get lower interest rates, and getting lower interest rates will help you save thousands of pesos in the long run.

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