The Impact of Your Credit Score
Although there are a number of ways to evaluate a borrower’s creditworthiness, the credit score is one of the most often used methods. A credit score is calculated using a number of factors such as credit history and the length of credit history. In short, not only is the credit score simple and straightforward to use, but the method used to calculate it also ensures that it is fair and accurate.
Why Is Your Credit Score Important When It Comes to Obtaining Financing?
Your credit score is important because it has enormous influence over whether a lender will be willing to lend a borrower money. Having a good credit score means that a lender may be more willing to lend money to a borrower. More importantly, having a good credit score may increase the number of potential lenders, giving a borrower options and flexibility when it comes to lending terms.
In contrast, having a poor credit score means that the borrower will only be able to borrow at higher interest rates and with extra conditions such as collateral tacked onto their loan contracts. Worse still, those borrowers with very poor credit scores may be unable to borrow at all because no lender will take on the risk.
Why Is Your Credit Score Important When It Comes to Other Matters?
Since lenders use credit scores so often to evaluate the creditworthiness of their potential customers, it should come as no surprise to learn that other entities do the same thing for much the same reasons. For example, apartment managers may run checks on credit scores before entering into lease contracts because that information tells them whether their potential tenants can be expected to pay the rent on time or not.
Although there are methods that can be used to soften the consequences of a bad credit score, having one can impact a significant portion of a person’s financial interactions for the worse.
Overlooking the importance of your credit score can be harmful to your financial well-being. So, keep an eye on your credit score and work to improve it through smart money and credit management.