Society is increasingly dependent on the use of credit for purchases and decisions.
5 reasons good credit is important
Good credit these days is used more than getting a credit card or credit. More and more businesses are making the case that you need to have good credit before they expand your products or services.
It affects where you live and how much you pay
Before you can buy a home, mortgage lenders want to know that you will not default on a mortgage.
If you do not have good credit, the lender will consider it risky to give you a mortgage loan. If you are approved for a mortgage, your loan affects your interest rate, which directly affects your monthly mortgage payment. Bad credit could mean a higher mortgage fee. Worse than that, your mortgage application could be rejected for bad credit.
Do not think this because you are not looking to buy a home right away as your credit is not important. Landowners also use their credit to decide whether to rent them to you. The owners consider your lease as a loan. You have been loaned a place to live and the landlord wants you to know that you will repay this loan. If you do not have good credit, you may be denied housing.
It affects what you drive and pay for the car
Unless you have the cash to buy a car, you will need to get a loan. Your credit not only affects your eligibility for the loan, but also the amount and interest rate of the loan.
In general, loan applicants with good credit qualify for higher loan amounts with lower interest rates.
Bad credit limits your options. Fewer lenders will work with you if you have poor credit, and those who do will charge a much higher interest rate on your car loan. A higher interest rate means a higher note in a car that pays every month.
It can affect your job search
Many employers conduct credit checks as part of the hiring process. (Keep in mind that employers check credit reports, not credit scores.) If you have not demonstrated financial responsibility, a potential employer may be hesitant to hire you. For example, an employer may believe that your debt level is too high for the salary offered.
Some employers also check credit scores before giving a promotion or raise, especially for financial or executive positions.
It affects your ability to start a business
Many people dream of starting their own businesses. Most startup businesses require a significant amount of cash that you may not have available. In that case, you need to get a small loan for the business. Among other things, you need to have good credit to qualify for a business loan.
This affects other monthly bills
It may be something shocking to learn that your credit is needed to set up utilities. Your electricity company claims you are borrowing one month of electricity. So, before turning on the electricity, the company will check that you have good credit. This applies to most utilities, including cable, telephone, water, and even mobile.
Because your credit is defined by how you pay (or pay) your bills in the past, many businesses – landlords, mortgage lenders, service providers, and even employers – use their credit to predict future financial responsibility. Whenever you need to borrow money, or even services, your credit is questioned. This is why maintaining good credit is so important.