Why your credit score matters more than you think
What's the story
Credit scores largely dictate everyday financial decisions.
These numbers, indicating how creditworthy you are, can affect everything from whether you are approved for a loan to the rate of interest you pay on them.
Knowing the importance of credit scores can help you make informed decisions that influence your finances.
Here are some important things you should know about how credit scores affect different facets of your decisions.
Loan decisions
Impact on loan approvals
Credit scores are also the first thing lenders look at while checking a loan application.
A higher score means you are more likely to get approved, as it means a lower risk for them.
On the other hand, a lower score can get you denied or may require you to submit more documents to get a loan.
Knowing this can help you maintain/improve your score to boost your borrowing potential.
Rate determination
Influence on interest rates
Interest rates on loans and credit cards are heavily influenced by an individual's credit score.
Those with higher scores usually get better rates, which translates into lower overall borrowing costs.
Meanwhile, lower scores may lead to higher interest rates, which means an expensive borrowing cost over time.
Being aware of this connection can push people to manage their credit responsibly.
Score enhancement
Tips for improving credit scores
To improve your credit score, pay your bills on time, reduce debt, and refrain from unnecessary hard inquiries.
Check your credit reports regularly for errors and dispute them immediately.
These are crucial for keeping a healthy credit profile, enjoying the benefits of lower interest rates, and improving your borrowing potential.
Annual free access to credit reports under consumer protection laws helps you in this.