Establishing Good Credit
Being judged by a number and not knowing what that number is for can be a terrifying prospect. The great news is that all you need to know about your credit score and how it is arrived at is just a few mouseclicks away.
The most important thing you should know is what a credit score is, and what it is used for.
Basically, your credit score is calculated using a formula that scrutinizes your payment history, the total amounts you owe, the length of your credit history, the type of credit you are using, and any new credit you apply for. A formula is used by the financial institutions to arrive at the big number, and this sum is listed by the three major credit bureaus (Experian, Equifax, and Trans Union). Your credit score then becomes the thing which determines your risk factor in terms of loans and other financial matters.
What most people don’t realize is how many things in their life are limited by their credit score, such as:
1. Finding a Home
- Acquiring a mortgage
can go with few, if any, complications if you have a good credit score. But you may not be aware that even landlords have the right to check out your credit rating to determine your suitability as a tenant. He will want to know that you pay your bills habitually and on time, among other things.
2. Getting a Car
- Just like acquiring a mortgage, buying a car with a car loan requires you to have a good credit score. Without a good score, it’s unlikely that you will get approved for a considerable car loan.
3. Starting or Expanding a Business
- Any business, big or small, needs capital, and it is normal to try start or expand one by obtaining a loan from a bank or other financial institutions. Your credit rating will be used as the basis for determining if the banks will take a risk on you and your business.
Are you starting to catch on to the theme here? Well, here are two more things that you may not realize can be affected by your credit score:
4. Finding a Job
- Many employers track down your credit score as part of your pre-employment background check. Why? Well, some hiring managers may look at your money troubles as a sign that you are irresponsible and unreliable, in spite of of how skilled or well-trained you are at your job.
5. Other Products and Services
- Necessities such as electricity, water, and other utilities need to be paid monthly, and so these companies will want to check your credit score out to see what kind of client you are. Other services such as cable, internet, and even your cellphone provider will also do a credit check prior to approving your application. Of course, let’s not forget the matter of getting a credit card. Most of all, your credit score is used as the basis for approving or denying your application, as well as your credit limit, if you do get a credit card.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment