Today, people are relying on credit more than ever before. The reason for this could be the fact that there are more lenders and requirements for approval are not as strict as they were before. However, getting these loans requires you to maintain good credit because it will be hard to access any loan with a negative credit history.
While a small percentage cares about their credit, there are numerous reasons why it matters. One thing you need to know is that your credit status not only affects your borrowing capabilities but also other important areas in your life. Here are the main reasons why you should start caring about the status of your credit if you don’t already.
• It Affects Your Borrowing Capabilities
Before any lending institution can give you a loan, they will always consider some important factors, and the primary one is your credit score. With good credit, your loan approval will be fast, and your terms of borrowing will be better than it would be with a bad credit score. For instance, a bank may consider qualifying you for a higher value loan based on your credit or offer a better interest rate.
Truman Advisors warns that if you thought that your credit score doesn’t matter, then it is time you start building yours to avoid being denied a loan when you need it most. The logic in this is that if you have not been repaying existing loans, you have borrowed already, why should someone trust you with another loan today?
You may have great business ideas, and all you need is capital to bring the idea into reality. A loan is one way you can rely on to finance this if you do not have enough money at hand. Unfortunately, if you have a bad credit score, your idea will remain just an idea for some time. Credit score matters a lot when you need to borrow.
• It Can Dictate Where You Will Live
Housing costs in different states vary wildly. Some states have cheap housing, and others are quite expensive. Apparently, everyone wants to own a home, and the fact is that when you want to buy a home, mortgage providers will want to know if you are a bad or good borrower. Therefore, if you have bad credit, they will perceive you as a risky borrower because the possibility of you defaulting on the mortgage is high. The impact is that the mortgage lender may either deny you the loan or approve the loan and charge you higher interest rates. This means that your monthly mortgage repayment will be very high. Sometimes you might be forced to buy a cheaper and lower-quality house than you wanted since your credit didn’t allow you to get your dream house.
Most people think that because they have no plans to buy a home currently, their credit doesn’t matter. Well, the bad news is that even your landlord may consider your credit before making you his tenant. According to Truman Advisors, most landlords tend to look at a lease as a loan, and they need to be assured that you will pay your monthly rentals in full and on time. In this case, if you have bad credit and are looking for a place to rent or lease you might be denied chances in different apartments. Therefore, your credit score might deny or guarantee you a chance to live in your desired home or area.
• It Will Determine The Type Of Car You Drive
If you do not have the money to buy a car, your next best option is getting a loan to buy a car. In this case, if you have a bad credit score, you may end up being denied. On the other hand, people with good credit will almost always qualify for loans and be charged lower interest rates. This means that bad credit will limit the options of the cars you can consider. Again, even if you qualify for an auto loan that charges high interest, your monthly car note will also be high, and this will adversely affect your budget. If you do not want to buy a car outright, you should know that some car dealers may not be willing to lease a car to you either with bad credit.
• It May Derail Your Chance of Employment or Being Promoted
Not every employer is concerned with your responsibility with finances and therefore will give you a job based purely on merits. However, some employers insist on working with financially responsible people, and if your credit report shows otherwise, then it might be a deal breaker.
Truman Advisors reminds that some job positions demand financially responsible people; especially those that are finance related such as accounting or becoming a financial advisor. In this case, before you are employed or given promotion, they might evaluate your credit status. It is not every employer who will check your credit before giving a job. However, it is good to be on the safe side because you may never know when a potential employer will decide to base your qualification for a job on your credit.
• It Might Affect Your Personal And Business Relationships
When looking for a life partner, their credit score may or may not be something you take into consideration. However, some people wouldn’t want to be associated with people who cannot pay their debts because they believe they will bring the same mess to a family setting. People who may have had a bad experience with a person with heavy debts or bad credit are more likely to consider a potential partner’s credit status before committing to a relationship. This usually happens after they are satisfied with other qualities of their life partners.
Also, you may avoid unreliable business partners because of their credit status. Such a business partner may not be responsible with your business’ finances, and you risk your business falling into a similar debt issue. This means that people will trust you more both in personal and business relationships if they know that you are highly responsible with finances.
• From A School Perspective
Most students do not have prior credit history when they are joining college and therefore will not be asked for a credit report. Every university wants to admit the best and brightest students, give them the best education, and in turn make the university proud. Therefore, a credit score is of little concern when registering these students.
Also, interest rates for school loans are usually the same because the market or the government set them. This means that your credit score will not prevent you from getting an educational loan when you need it and neither will you be charged higher interest. Everyone wants to see an educated society, and therefore many lenders are willing to do everything possible to lower interest rates for student loans. The government is actually subsidizing these loans to ensure access to these loans and hence quality education. This is a good thing because your credit score for once will not matter. However, when you start working, you will need to repay your student loan in full.
Your credit is what will assure people and companies you deal with that you are responsible for finances and therefore can trust you in the future. They will come to this conclusion after evaluating how you have been paying your past bills and loans. Always remember that every time you want to borrow or access some services, your credit will be evaluated. Most mortgage lenders, banks, auto lenders, landlords, employers, utility providers, and potential life and business partner will consider your credit before they can make any commitment with you. Do not lose great life or business opportunities because of having bad credit.