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Why is it important to have a good credit score?

A credit score is a computer-generated numerical rating which helps lenders to determine your credit worthiness. It is intended to assess whether you are consistently on time with your payments, whether you have a stable life style and whether you have enough income to cover the risk to the creditor. FICO is the most common credit score. The higher the FICO score, the less risk the lender assumes in providing your loan.

Credit scores are valuable because:

1. They allow a quick evaluation of your credit report
2. They treat everyone based on the same criteria
3. The scores will change to reflect your changing circumstances and payment patterns
4. More people can get credit
5. Because more people are allowed to borrow, interest rates for all can be reduced

Credit scores can be determined by contacting one of the three major credit reporting agencies: Experian, Equifax and TransUnion. It’s important to review and correct these credit reports on a regular basis, preferably at least once yearly.

It is important to have a good credit score for three major reasons:

A good credit score generally helps you to get better credit offers

You may be eligible to receive gold or platinum credit cards at better interest rates. You may be eligible for mortgage loan programs which are not available to those with lesser scores.

A good credit score generally helps you to get lower interest rates

Many mortgage lenders will not work with credit scores under 620. However a score over 700 can make as much as two to three percentage points difference in the mortgage loan interest rate.

A good credit score generally means faster processing time on credit approvals.

If you have a lower credit score you will require additional documents on your part in order to get a credit approval.

A good credit score can have a positive impact on applications for employment or ho using

Many prospective employers and landlords today routinely check credit scores when interviewing applicants. Candidates with higher credit scores may receive higher ratings because of their proven payment record and creditworthiness.

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