Why Your Credit Score Matters
Why Your Credit Score Matters
Credit scores are used to determine credit worthiness, which can affect your ability to buy big-ticket items like homes and cars, the rates you pay on credit cards, student loans, and even insurance policies. You may also be charged more for homeowner’s or renter’s insurance. Your credit score goes up and down based on whether you pay your bills on time and how much debt you have.
What is Your Credit Score?
Your credit score is a number that reflects your financial behavior. It’s calculated from credit information in your credit report based on information provided by each of your lenders as well as other people you may owe money to. The credit bureaus use this information to assess your creditworthiness.
Credit scores have different ranges because there are different companies that calculate credit scores. Higher credit scores represent lower credit risk and vice versa. The higher your credit score, the more likely you are to be approved for loans.
What Does Having Poor Credit Mean for You?
If you have poor credit, it can make life difficult for you in many ways. For example, credit scores often determine whether you qualify for an apartment or a house. Having poor credit can even cause you to lose out on employment opportunities if the position involves having financial responsibility.
Jonathan Osler believes that it is important to remember that credit scores tend to drop when your credit file has negative information in it and when creditors see your credit report as less than perfect. For example, if you miss a payment, you can expect a large drop in your credit score.
Can You Get Credit With a Low Credit Score?
A low credit score means high interest rates on loans and not being able to get approved for certain loans or mortgages. Depending on how low your credit score is and why it’s low, you may still be able to qualify for some types of credit or nothing at all. Larger loans, like a mortgage, are hardest to get because a large amount of money means more risk to the lender. It can be easier to get approved for a credit card with a low limit, but you’ll also likely have a higher interest rate.
How Can You Improve Your Credit Score?
It’s important to take steps to improve your credit score by paying off debts and making timely payments. It’s in your best interest to not only improve credit score, but to manage credit responsibly in the future. Jonathan Osler believes it is important to establish a budget and financial goals that will give you an idea of how much credit is safe for you to have available.
You should also check your annual free credit report from each of the three major bureaus every year because errors on your credit report could be lowering your credit score. Osler encourages people to find and fix these errors. The credit bureaus are required by law to provide accurate information. Of course, you’ll also want to make sure that you’re managing your credit responsibly if you want to keep your credit score up.