If you haven’t noticed, your credit score is one of those little details that, right or wrong, determines how many opportunities you’ll have in many areas of your life. A high credit score gives you a lot of leverage and the opportunity to purchase and invest in things at a reasonable rate. A low credit score, on the other hand, holds you back and puts your life behind the eight ball, so to speak.
If you fall into the latter category and have a low credit score, it’s important that you start taking it seriously. Not quite sold on the idea of investing time and energy into increasing your score? Here are a few specific reasons why you need good credit.
1. Impacts Your Living Situation
It doesn’t matter if you’re renting or buying a house, your credit score impacts your living situation. For renters, a credit score is one of the first things a landlord looks at when evaluating you as a tenant. If you have an extremely low score, you may get denied altogether. If you don’t get denied, it’s possible that you’ll be charged a higher rate.
Ready to buy a home? You might not be if your credit score is too low. Your credit score is one of the biggest factors lenders look at during the approval process. A poor score will disqualify you, while a lower than average score could mean a higher interest rate (and tens of thousands of extra dollars spent over the life of the loan).
2. Influences Your Car Buying Opportunities
As is the case with buying a home, lenders look at your credit score when you want to buy a car (unless you’re paying in cash). While you’ve certainly heard the offers on the radio or on billboards where car dealers promise to give a loan to anyone – even those with no credit – what they don’t tell you is that they’re going to give you an abysmal rate.
“If you walk onto a car lot with an extremely low credit score, you may be able to drive off with a vehicle. However, the amount of interest you’re going to be paying on that vehicle could put you upside down on loan,” Scott Smith, President of CreditRepair.com explains. “It’s imperative that you improve your credit score before you go shopping.”
3. Affects Your Job Search
While a prospective employer won’t necessarily check your credit score, they are apt to review your credit history. They do this to determine your overall responsibility. If you’ve shown signs of being irresponsible with your money, they’re going to assume that you’ll be just as irresponsible with theirs. As a result, you may find it hard to secure a good paying job.
4. Inhibits Your Ability to Start a Business
Want to start a business and get a small business loan from your local bank or credit union? A low credit score means you can forget about it. Small businesses fail at an alarming rate, to begin with, so a lender isn’t going to give you money when you’ve shown that you’re already a poor borrower. It just doesn’t make sense from their perspective. You’ll have to go a non-traditional route if you want to obtain some capital.
Start Improving Your Credit Score
It’s impossible to establish a good credit history overnight, but you can start doing smart things that will allow you to gradually lift your score and put yourself in a better financial situation for the future. Like it or not, credit fuels the world. It’s time for you to recognize and respect this if you want to be successful.