In today’s world where most businesses and households run on credit, having strong credit worthiness is more than important. A high credit score builds up your financial power, making you eligible for financial services and loans. Nationwide consumer reporting agencies, such as Equifax, TransUnion and Experian, look at your credit reports to calculate your credit score, which is a representation of your credit worthiness. However, the real question occurring in everyone’s mind is whether your FICO score is important enough to be worth all the drama. Many find it hard to be vigilant of their financial position and their credit score at all times, especially when a tiny mistake can make the score plunge. In such a situation, they wonder if they should even be making an effort to maintain a high FICO score. Benefits of a High Credit Score In order to analyze what makes the FICO score so important, it is essential to first see what benefits a high score can bring to you. Credit experts often state that a good credit is a consumer’s superpower. It is with this financial strength that you can get what you want the way you want it. Here are a few examples of how you can benefit if you have a good credit score.
- New Loan
Each time you apply for a new loan, the lender will try to access your credit history and see whether you will be able to honor your promise of paying back the amount you are borrowing. A high FICO score means that in the past you have always paid back the money owed on time and are very unlikely to default on a payment. A good score will encourage the lender to approve your new loan.
- Interest Rate
With every loan come some strings attached. Interest rates are one of the things that come across as a cost of borrowing money. People with a good credit history are perceived as ‘safe bets’ whereas people who have a bad credit score are seen as ‘risky’. As a result, lenders charge a higher interest rate to those people who are a risky investment and have a bad credit score.
Many employers run an in-depth background check on their prospective employees. One of the factors that are thoroughly checked is financial standing. Many employers treat credit history as a parameter of judging an employee’s sense of responsibility and conscientiousness. Nobody wants to hire someone who is deep in debt or cannot take care of himself financially.
When you go out to rent a house or apartment, you are in fact entering into a contract in which you promise to pay the landlord for using his property. The landlord determines his decision of whether to rent out to you based on your credit score.
Insurance companies also look at your FICO score while they are reviewing your application. This is especially true for car or homeowner’s insurance. Therefore, maintaining a high FICO score can help you land a better deal in most related cases.