We all know that credit scores are important, but do you really know why? We’re here to let you know what goes into your credit score and why it’s important to keep it at a good level.
What is a Credit Score?
A credit score is a numerical value used to evaluate a consumer’s creditworthiness based on financial history. The scores range anywhere from 300-850 (bad to good accordingly) and are determined by three main credit bureaus; Equifax, Experian, and TransUnion. They are based on things like on-time payments and how many accounts you have open in good standing.
When applying for a loan, financial institutions look at your credit score and credit history to determine if you’ve proven to be responsible with your payments in the past. They do this to ensure that they only give loans to the people who they are more confident will be able to pay them off. That is not to say that you cannot get a loan if you have a less-than-great credit score. Typically, the lower your credit score, the higher your interest rate on the loan will be because you are considered a higher liability customer. This can add up quickly for large mortgage or home loans, as interest can accrue over time making it more difficult to pay off the balance of the loan.
If you’ve ever rented a house before, you know that landlords and property managers commonly ask for your social security number. This is because they’re running a background and credit check on you to determine if you will pay your rent on time. If your credit score is too low for their liking, they will more than likely reject your application and you will be stuck looking for another place to live.
Sometimes, employers will look at their prospective employees’ backgrounds and credit scores to assess the risk of hiring a candidate before extending an offer. This is most common in finance roles or in a position where you will be responsible for handling company money. The thought process being, if you can’t handle your own finances well, how could you manage those of others?
If you need help building your credit or repairing damaged credit, our credit builder loan is a perfect way to build positive credit without any risk. Learn more and apply online today