Have you ever tried to apply for a home or car loan but you were denied? Or maybe you needed a new credit card but all of the companies just kept shaking their heads no? This is most due to your credit score being lower than their expectations. A credit score is one of the most important records in one’s life, because it follows a financial history forever and determines so many things.
Your credit score or FICO score affects your entire life and is one of the most important things to take care of. It determines how likely you are to pay back a loan. This number is generated through a series of records kept in your credit file over a lifetime. A person with a high credit score at 850 is much more likely to pay their loan back than someone with a low score such as 300. A person with a high score has been on time for every payment, and has kept a good track on their credit. A low score is determined when someone has not made payments on time for credit cards, loans, house payments, or any other payment in the past. This is why it is important to always pay bills on time and in full, to show them that you are responsible and to also build your credit score.
The reason this score is so important is that it determines what type of rates that will be available for you as a borrower. Someone with a higher score will have a much easier time receiving a car loan as someone with a low score who has shown that they cannot make payments on time in the past. If you have a credit score above 700, you will receive low interest rates, and depending on how high your score is the lowest. However, if your credit score falls below 600, then you will receive high interest rates, if they even give you a loan at all.
This is because in the past you have shown that you are not good at making payments on time. High credit scores not only make you trustworthy, but it will give you lower interest rates on loans and credit cards. People with lower credit scores get slammed with high interest rates because they always pay the minimum. This makes the interest build up and they end up paying double the original balance in interest alone! Making bigger payments is the way to go, because it will not only raise your credit score, but lower your interest rate and get rid of the bill faster.
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