Financial dealings, together with keeping them stable and in check, can be a tough task for many people, especially for those who have no idea or interest related to the subject. One of the many financial terms that you need to be careful about and have knowledge about is your credit score.
If you ask people about the importance of a good credit score, you might get to hear different answers both for and against the subject. This can create a lot of confusion, so in this article, we will talk about if a credit score is important and why it is important.
To feed your curiosity a little, we will tell you right off the top that, yes, having a good credit score is important. Now let’s dive into the details.
What’s A Credit Score?
Credit score is a 3-digit number ranging between 300 to 900. It is calculated by some major credit bureaus of whichever country you’re living in. The exact factors in determining the credit score might vary, but to sum them up, listed below are a few things that contribute to your credit score:
- Your debt repayments
- The track record of your debt repayments
- How much available credit is currently being used by you?
- How often do you apply for new debts?
- The types of debts you have had taken
Why Do You Need A Good Credit Score?
Now, let’s talk about the big question. Why is a good credit score important in the first place? Well, there are a number of reasons where having a good credit score will prove to be of great importance for you. We have listed some down below to give you an idea.
House-Buying
Before you can buy out a house on a mortgage, your mortgage lenders will have a thorough look at your credit score and your credit history. If they find out that you haven’t been making timely or, worse, any repayments, they might never grant you that mortgage loan.
Auto Loans
It’s true that affording a car while taking care of the house and other related expenses is really tough. That is why many people choose to apply for auto loans to finance their desired car using a loan that they can pay off later. To qualify for an auto loan, they will have to have a good credit score. And the lenders will most definitely have a look at it.
Business Loans
If you aspire to be a businessman but don’t have enough means for it, you will most likely look towards a bank for some loan. When you do that, the bank will look towards your finances, documentation, including your credit score, to assess if giving you a sizeable amount of money would be a good idea or not.
With the reasons mentioned above, we think it’s safe to say that having a good credit score is really important. If it’s not up to the mark, you’ll end up taking a higher financial hit and lose on to some good deals on the necessary purchases. If you like this learn 5 steps you can do to improve your credit score?
