Your credit score is an extremely important factor in your financial wellbeing. Today's financial landscape runs on credit. Whether you are seeking a mortgage loan, car loan, or even a simple credit card – there is a creditor on the other end loaning you money. That person will decide whether to loan you money based on your three-digit credit score. The fact is – credit is used for a multitude of things – some less obvious than others. So, what happens when your credit score is lacking?
You will pay higher rates
Very few people are fortunate enough to forgo credit and pay cash for their purchases. At some point, you will need to borrow money. Assuming that you will be able to secure a loan with bad credit, that loan will cost you more money compared to someone with good credit. For example, on a 30-year mortgage for $250,000, the savings can be powerful. If you can qualify for a rate of 4.59 percent on that mortgage, you will pay $210,842 in interest. On the other hand, if instead of 4.59 percent you only qualify for 5.59 percent, you will pay $266,104 in interest. In this instance, having good credit could have saved you nearly $56,000. The same concept applies to every type of borrowing.
You will have difficulty renting a house or apartment
Landlords want to ensure that they will receive a rent check every month. While landlords may trust your promise to pay, they will want to verify that claim by checking your credit history. This is a common practice landlords use when screening tenants. If you have a bad credit score, you are likely to miss out on the most desirable places to rent.
You will have more difficulty landing a job
Creditors, landlords, and even employers can be interested in your credit score. This is especially true in the financial industry. If you can't manage your own money, how can you be trusted to handle other people's money? Employers can use your credit history to gauge how responsible you are.
Being aware of your credit is critically important. Having a poor credit score can cost you thousands of dollars over your lifetime. The money that you save by having good credit will enable you to save for retirement or get out of debt faster. Poor credit can also impact non-financial aspects of your life such as your living arrangement and career. Creditors and non-creditors view your credit score as a testament to how responsible you are (or aren't). If you have not already, it is time to build and take advantage of superb credit and stop being held back by a poor credit history!