If lenders see that you have a quality credit score, they will be more willing to offer you a loan, potentially lower interest rates, and simply make the process more streamlined for you. Below we’ve listed 5 reasons your credit score is important.
5 Reasons your Credit Score is Important
1. Buying a Home
You’ll most likely have a goal to someday buy a home. Your credit score is essential to becoming eligible for a loan. For most people, a loan is the most viable option to getting enough capital to make the purchase. The bank that you work with to get a mortgage (home loan) will use your credit score as part of the equation when determining how much they will loan you, and at what interest rate.
2. Renting an Apartment
Some landlords, depending on the rental market will look at your credit score to determine how much of a deposit they will require you put down. If it’s a competitive market for renter’s, landlords want people who will be on time with their payments every month. They can afford to be selective to who they’re renting to.
3. Buying or Leasing a Car
Your credit score will be used to determine the payment schedule, interest rate, and loan amount, which in turn determines what type of car you may be eligible to buy.
4. Starting a business
There are a variety of ways to fund a startup business, however, a common route is through a bank. The bank will use your credit rating as part of the equation in determining whether to finance your venture. Again, the terms of the loan can be more favorable for you if you show up with a quality credit score.
5. Other users of your credit score
Cell phone providers, utility companies, and insurance providers.
In conclusion, starting to establish credit early will only benefit you as long as you are responsible for making payments on time, keeping a low balance, and limiting your number of debt obligations. You’re entitled to a free credit report once a year. If you’d like the check your current credit score we’ve listed two free sites below.
Keep these considerations in mind when making decisions that could affect your credit. Building good credit can take time, but it’s definitely better than having to fix it later!
Levi Sanchez is a CERTIFIED FINANCIAL PLANNER™, BEHAVIORAL FINANCIAL ADVISOR™ and Co-Founder of Millennial Wealth, a fee-only financial planning firm for young professionals and tech industry employees. He is an avid sports fan, personal finance and investing geek, and enjoys a great TV show or movie. His mission is to help educate his generation about better money habits and provide financial planning services to those who want to start planning for their future today!