Does Your Credit Score Matter?
Does it really matter whether or not you have a good credit score? There are some people who do not give much attention about the status of their credit while some doesn’t even bother building a credit score of their own. But does it really make a difference? To answer this question more objectively, let us first talk about what a credit score is.
What is a credit score?
Since 1971, the government has made a provision for all consumers the right to check their financial records for accuracy through the Fair Credit Reporting Act. The credit score is the calculation of all records in your credit history. The Fair Isaac and Company has set a standard criteria in calculating one’s credit score which is also known as the FICO score. This is the system of scoring used by credit bureaus today and is accepted by all banks, lenders and financial institutions.
The criteria that makes up your credit score is divided into five categories. These are your payment history (35%), your total outstanding debt (30%), the length of your credit history (15%), inquiries on your credit history (10%) and the types of credit you used (10%). Based on these categories, an individual’s total score is tallied.
The average credit score is 650 which means a score below that is considered to be low and a score above is high or excellent. A low credit score makes an individual a high risk borrower while a high score makes you a good candidate for acquiring new credit.
The three major credit bureaus are Equifax, Experian and TransUnion and each of these companies tally their own report. It is possible that your credit scores from each company will have a slight difference. Some creditors will get the average of your credit score from all three companies to get a more accurate interpretation.
Who’s interested in your credit score?
Now that we’ve discussed what a credit score is, why should you be interested? Lenders and insurers take a look at your credit report before they grant approval to your applications. Some lenders strictly require a high credit score while some lenders allow a low score but with some restrictions. Usually, people with low credit scores are given higher interest rates, lower credit limit and more limitations.
SPONSORED LINK
If you’re going to rent a house, landlords also will check your credit worthiness and reliability based on how high or low your credit score is. Tenants with low credit score may be required a co-signer or a security deposit in order to rent the property. Even cell phone carriers care about the status of your credit. If you’re applying for a plan, you may be required to show a reasonable credit score to be approved.
Employers also use credit scores when assessing a potential employee. According to a survey conducted by the Society for Human Resource Management, employers prefer to hire workers who can present an impressive credit score. This is because a person’s credit history speaks a lot about one’s sense of responsibility and capability as a worker.
Considering all that we’ve discussed, perhaps we can now answer the question straight. Does your credit score matter? Of course, it does. A good credit history and score will open you more doors of opportunity and convenience.
|
Pamela Williams is a Loan Consultant, Internet Marketer and Writer. For years she had helped consumers and business owners especially regarding business credit cards. This resource is dedicated particularly on business credit card reviews, articles, tips and advice, and online application so that consumers and business owners may compare which is the best business credit card for their business. Copyright 2010 |