If you’re looking into taking out a new loan but haven’t paid close attention to your credit score, now is the best time to review it. Purchasing a home isn’t just about securing finances—your credit scores need to look attractive to potential lenders. Calculated between the ranges 301 and 850, you generally want to fall under the upper-division of these numbers. Let’s explore the reasons why.
1. Low scores can raise the price of your bills
If you thought the bills you receive from cellphone providers, utility companies, or even insurers depended entirely on your actual usage, think again. Businesses that are worried about your credit score may charge you higher fees or rates for collateral.
2. You might not get the home you want
Rent-to-income ratios aren’t the only factor that can dictate whether or not you’re able to secure your dream home. Second to your earnings, property managers pay close attention to your credit score and whether they can trust in your ability to shoulder your monthly mortgage.
3. The interest on your mortgage rate can rise
Higher credit scores often result in better interest rates on your mortgage. On the other hand, a low credit score doesn’t demonstrate your ability to maintain a home, which means you’ll probably want to improve the number before jumping headfirst into a home purchase.
4. Bad scores can negatively impact your relationships
Lousy credit scores being a romantic turn-off may seem superficial, but nearly 4 in 10 adults find it more difficult to invest in a person with a lower score. Remember, the state of one’s finances can be an accurate depiction of their financial life and whether or not they can provide the relationship with the security it needs.
5. Your loans may not get approved at all
As we previously mentioned, your credit score is a determining factor when it comes to taking out a loan. For auto loans especially, your credit scores are everything. Though it isn’t impossible to book a loan with a lower credit score, expect that your interest rates will likely skyrocket.
6. Iffy scores can influence the way you pay for things
Naturally, a lower credit score can hinder the way you use your credit card, whether by a decrease in your credit limit or declining line increase requests. Lenders can also choose to close your account entirely, limit your payment options, and rapidly increase your credit utilization rate.
7. You might find trouble getting hired
While it isn’t standard protocol, it’s up to an employer’s discretion to review a prospective employee’s credit history, especially those looking to work in finance. To an employer, a low credit score puts the business at risk of embezzlement, distrust, and increase liabilities for negligent hiring.
Beyond being able to take out a loan or make a major purchase, a good credit score is the key to living your best financial life. Treat your credit line with care by making well-informed investments and being open with your lenders.
If you’re looking to stay on top of your finances and get your finances on track, Nava Ventures makes it easy to crunch the numbers.
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