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Importance of Credit Score

By Janet Lacey
Published: Friday, September 4th, 2009

Credit score has a very special part in your financial life and it follows you forever. A good score can either reward you or can haunt you. Everything depends on how you manage your credits and payment activities. The compilation of the credit score is done on the basis of information in your credit history. All your credit activities are rated on a numerical scale from 350 to 850. This 3 digit number is your credit score and higher the score, better it is. Various factors like late payments, maxed out credit limits, non repayment of loan, delinquent accounts and others can lower your score. Most of us think that credit score is only important when we need a loan or a credit but the fact is that its use is much beyond than this.

  • Credit score matters ahead of Loans
    We all are aware of the fact that a low credit score will make it difficult to get a bank loan and credit but there is much more than this. Your low score not only affects that whether you will get loan at good rates but it will affect many other things like employment opportunities, insurance rates and others.
  • Credit will be checked by employers
    Checking the credit of the prospective new employees is becoming more and more common practice nowadays. This practice is done because the employers think that by checking the credit history they can determine the responsibility of the new employee. Many a times a bad credit history may be there due to some matters which cannot be controlled by an individual and in such circumstances this factor should be kept in mind.
  • Determining Insurance Rates
    Your credit score will play vital role while determining your insurance premium for your new vehicle or for your new home. An insurance score is created by the insurers on the basis of your credit score which ultimately decides your insurance rates and premium. If you have a poor credit score it can hit you hard on your pockets and cost you several hundreds dollars extra as compared to a good score.

Thus it is very important to keep your credit score high by following few simple tips. You should pay your balances each month without any delay and late payments so that it gives you rise in your score. Paying more than minimum required amount insures you of staying away from debt and will thus save lot of money on interest rates and premium. Loan repayment should always be done on time to have a positive impact on your score as it shows that you are capable of managing your credits efficiently.

Thus make all possible efforts to maintain a good credit score so that you can have a stable financial position at present as well as in future. You can get wide array of benefits by having a good score which will not help you only in your financial life but also in professional lives.

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