Credit is becoming increasingly important to consumers and businesses for purchasing and making financial decisions. The importance of a good credit score extends beyond simply getting a loan or a credit card. Your credit score indicates how well you pay off your debts to lenders.
It is important to understand that a credit score is more than a number. It represents one of the most relevant elements for any consumer. Therefore, it should be part of your financial plan.
To better understand its impact, check out 5 reasons having a good credit score is important.
1. Facilitates the granting of credit
As we said, this number serves as a measure of the ability to pay and the behavior of consumers. Therefore, it has become one of the most reliable measures to generate credit analysis.
The lender can check your credit score when you ask for a loan or apply for a new card. Depending on the amount, your request is either accepted or declined. In some cases, it even works for financing and other lines, so it has everything to do with making your dreams come true.
2. A good credit score can reduce interest rates
In simple terms, interest is the institution’s remuneration and the “safety cushion” in case of default. So the less risk of default you have, the lower the interest rate can be.
So, taking care of your score is a way to get better terms when hiring credit, regardless of the type. Therefore, a good credit score makes your financial life even better.
3. A good credit score makes the payment of debts easier
When you take out a loan, you assume a long-term debt. In addition to the amount to be used, you pay the interest rate. The larger it is, the higher its costs until the end of the contract. Considering all of this, it’s easy to understand that a credit score can also help.
After all, it helps to lower interest rates and therefore lowers the total debt. In practice, the installments get smaller or last for a shorter time, which greatly relieves your budget.
4. Streamlines procedures
When a customer proves to be at medium or high risk of default, the entity or company needs to do a much more thorough analysis. So, it means that the process becomes more bureaucratic, and the response takes time.
The score, on the other hand, can be consulted in a matter of seconds. Depending on the amount you present and the ranges defined by the company, good credit makes the granting of credit quick.
5. A good credit favors the management of financial life
Knowing your credit score and monitoring its evolution is also a way of having a kind of “X-ray of your financial life.” It considers various factors, habits, and behaviors about money. It also indicates if you need to become aware of and improve in some aspects.
This is essential for noticing the need to keep the budget in order and developing new habits. Thus, you can optimize your budget and start using your money in the best way.
How do I check my credit score?
Several credit monitoring apps and services like Mogo allow you to track your credit online. Mogo offers access to your free credit scores (Equifax) when you apply for its free prepaid card. The score is updated monthly.
You can also register for a $1 Credit Monitoring trial with credit verify to access your Credit Report. This company gives you more credit monitoring features with real-time updates on your score. You can access your Credit Report, dispute errors, Plus get $25 monthly reward when you start your 7-days trial today!