Our credit score is one of the most important three-digit numbers in our lives. A high credit score can save us thousands of dollars in interest payments, while a low credit score can cost us dearly in terms of higher interest rates and denied loans.
But what exactly is a credit score? And why is it so important? Read on to find out the answers to these questions and more.
What is a credit score?
A credit score is used by lenders to assess your creditworthiness – i.e. how likely you are to repay a loan on time. Your credit score is based on information in your credit report, which is a record of your credit history.
There are two main types of credit scores: FICO scores and VantageScores. FICO scores are the most commonly used type of credit score, and they range from 300 to 850. VantageScores range from 501 to 990.
Your credit score is important because it is one of the factors that lenders will look at when considering you for a loan. The higher your credit score, the more likely you are to be approved for a loan and to get a lower interest rate.
A low credit score can also lead to higher insurance premiums, as insurers view people with lower credit scores as being more likely to file insurance claims.
Why is it important to improve credit score?
There are a number of reasons why it’s important to improve credit score. Here are eight of the most important ones:
- You’ll save money on interest payments
If you have a high credit score, you’ll likely be offered lower interest rates on loans. This can save you thousands of dollars in interest payments over the life of a loan.
- You’ll be more likely to be approved for home loan in Daybreak or wherever you are
If you have a low credit score, you may be denied for loans or only offered loans with high-interest rates. Improving your credit score can increase your chances of being approved for loans.
- You may be able to get a better job
Some employers check job applicants’ credit scores as part of the hiring process. Having a high credit score can give you an edge over other candidate. This is especially true for jobs that involve handling money.
- You’ll have more negotiating power with creditors
If you have a good credit score, you’ll have more negotiating power with creditors if you ever need to borrow money or negotiate a payment plan. Creditors are more likely to work with people who have good credit scores.
- You can get a lower insurance premium
As mentioned earlier, people with high credit scores often pay lower insurance premiums than those with low credit scores. This is because insurers view people with high credit scores as being less likely to file insurance claims.
- You may be able to rent an apartment more easily
Some landlords check prospective tenants’ credit scores before approving them for an apartment. Having a high credit score can make it easier to rent an apartment.
- You can get a higher credit limit
If you have a high credit score, you may be able to get a higher credit limit on your credit cards. This can come in handy if you ever need to make a large purchase or have an emergency expense.
- You’ll have peace of mind
Finally, improving your credit score can give you peace of mind. Knowing that your credit score is high can help you feel more financially secure and confident.