Today, societies are becoming more and more dependent on credit for making purchases and decisions. Now-a-days, a good credit is important not just getting a loan or credit card. Businesses are making it crucial for the customers to have good credit score before extending their products or services to them.
Having a great credit history and maintaining a good credit score could have a dramatic impact when you consider applying for a credit card or even short term loans.
Benefits of Having a Good Credit Score
Buying a Home
Before you could buy your dream home, lenders would wish to know that you won’t fail to pay on your mortgages. In case you do not have a good credit score, lenders would consider it to be risky giving you any mortgage loans. If you get a mortgage loan, your interest rate is impacted by your credit score which ultimately impacts the monthly mortgage payments which you need to pay. Bad credit score could land you with higher mortgage payment. Even worse, a bad credit score could be a reason for rejection of your mortgage loan application.
Starting a Business
Most of the people have dreams of being their own boss and having their own business. Most of the startups require if not a sizable pool of cash, bridging loans for starting their business. Among other things, you would require a good credit score to qualify for such loan.
Buying a Vehicle
Buying a car or any other vehicle is very common thing today, and most of the people go for auto finance or auto loans when they’re considering buying a vehicle. Vehicle loans are typically of smaller amounts, so they’re usually easier to get even with a poor score. However, with a poor credit score one would only qualify with a high rate of interest and bigger down payment on the vehicle. It could imply that you pay several thousands more for the same vehicle compared to another buyer with a good credit score.
Better Interest Rate on Loans
While having a good credit score is a crucial factor to obtain any financial assistance, most of the banks still give loans to the individuals with a poor credit score. In case your credit score is dented, you would need to provide much more documentation for a loan. You would in all likelihood have a higher rate of interest on your loan. This is how banks and other financial institutions outweigh their risk of loaning their funds to you. You can even increase credit score with rent payments and this is commonly regarded as one of the best ways to increase your score.
Enhanced Borrowing Limits
Your borrowing capacity is dependent on not just your income but also your credit score. One key benefit of maintaining a good credit score is that the banks and financial institutions will lend you more funds as you have demonstrated that you would pay back the loan on time without default.
The Bottom Line
By now, you perhaps understand the importance of a good credit score. A good credit score could have a positive impact on several facets of life. If you are not there yet, you don’t need to worry! You could still improve your credit score over time. As your credit score is defined by how you pay your bills, banks, landlords, employers and even utility providers use your credit score for predicting your financial responsibilities. Anytime you require borrowed funds, or even services, your credit score is evaluated. This is why it is important to maintain a good credit score.