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The Value of Getting a Good Credit Rating

By Ruth Racey
Published: Thursday, December 24th, 2009

Truly, it is already becoming a norm for people to use credit cards rather than cash every time they spend or purchase goods and services. This is because of the fact that spending using credit cards are actually far more convenient than spending using cash. Whenever you are using your credit cards, you do not have to bring all of those cash, and you can actually purchase and spend even way beyond what you actually have. However, this is also the reason why many consumers are mismanaging their respective finances. Overspending and financial mismanagement may actually lead to you getting a low credit score, which in turn may mean financial disaster for you and your family. 

Remember that for people who are using credit cards, credit scores are very important. Every time you make transactions using your credit card, it is your credit score which actually determines the leverage every time you spend. In addition, it is also your credit score which may determine whether you still have a secure source of financing or not. Here are the different ways on how a credit score may actually mean a lot to your financial situation:

  • The health of your credit account
    Remember that it is your credit score which actually brings a large bearing to the health of your credit card account. Whether you have been accumulating a huge amount of debt, or if you have been paying your bills properly, all is reflected in your credit score. In this case, having a good score may actually mean that you are an able financial manager. Likewise, having a low score may actually be a signal that you are already in the brink of bankruptcy. Easily said, the difference between being broke and being financially stable may actually be indicated by your credit score. 
  • The interest that you have to pay for your debt
    In addition, remember that having a high or low score may also determine how much interest you have to pay, either in your bills, in your loan, or in your mortgage. Remember that having a low score may affect your ability to pay, and having a high score may actually point that you can pay for you debt. Therefore, lenders are willing to require low interest payment terms for people with high score, while people with low scores are doomed t pay for incredibly high interest rate terms of payment.
  • Your ability to secure future sources of finances
    Remember that lenders are always thinking about the credit worthiness of a person before they are going to approve your loan. Simply put, your credit worthiness is actually a measure of your ability to pay or not, vis a vis the condition of your credit account. In this case, the main indicator is your credit score. Therefore, having a low score will likely bring a disapproved loan. However, whenever you have high credit scores, most likely, your loan will easily be approved by lenders, for they are more willing to lend to those who have the ability to pay.

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