Importance of Credit Scores

The Different Ways Your Credit Score Affects Your Life

People have different buying and spending habits, so they naturally have different advice for achieving financial stability. However, there are some things that everyone seems to agree on; learn how to budget, save some money for rainy days, always pay your debts, and maintain a good credit score.

While the benefits of the first three are readily apparent, it is not always clear why having a good credit score is essential in keeping a healthy wallet. Here are some of the ways your score affects your financial standing:

It can affect your chances of landing a job

Employers conduct credit checks as part of the hiring process today. From the perspective of an applicant, these things might not have anything to do with how well you can perform your duties. However, employers must devise ways of filtering their pool of candidates to get to the people who are most suited for a job.

Sometimes, that means using a credit check to make informed hiring decisions. Someone who demonstrates financial responsibility will be more likely to perform job functions well. In addition, they might be even more selective for jobs that involve access to money, customer data, or company information.

This does not mean that a person with a bad credit score is lousy with cash or will take advantage of confidential data. However, the reality is that some employers use credit scores as part of their decision making.

You might not be able to rent or use your utilities

Aside from employers, landlords can look at your credit score and decide if they want you to rent their place based on what they find. You might lose out on someone looking at the same place but who has a higher credit score than you.

What’s more, if you have poor credit and financial life, you might not be able to use water and electricity. Some companies ask you to pay a large deposit as insurance.

You might not get that car or home you want

If you’re in the market for a home, you would definitely need a loan, unless you’re paying for your house in cash. Not a lot of people have that kind of money lying around, though. You need a good credit score to get the loan terms and interest rates that you prefer.

Suppose you’re alright with your living arrangements and have no plans of moving out soon. That is fine, though unwise. For instance, 2019 left more than 100,000 people in California without a home due to the wildfires in the state. That meant quickly looking for accommodations, which is easy enough for people with good credit standing.

The same is true for cars. You could have a perfectly functional car now, but you don’t know when it might break down. You would need to spend about $37,000 to get a new car. That is not a small amount of money to many people, and taking a loan for a car is often the answer. You will find it easier to secure your loan if you have a good score.

It will be hard to negotiate with financial providers

To keep your premiums low, you should improve your score. Insurance companies tend to charge higher for people with bad credit scores since they are likely to file more claims. Financial providers will also keep your credit limit low if you don’t have a good score. That can make it difficult for you to take out substantial loans in case of emergencies like sudden hospitalizations.

Conclusion

Getting a good credit score unlocks plenty of opportunities for you to gain better control over your finances. Aside from securing better rates for loans, a good score will probably help you get the mortgage, negotiate the credit line, and even get the job that you want.

Check out our website for more information about the importance of financial literacy in banking! Follow us on our journey by joining our app wait-list below 😄

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