First of all, what is a credit score? All of us realize how important it is to have a good credit score when it comes to purchasing a home, an automobile or other purchases that usually require a loan. But when you say the word "credit score", what does it actually mean? Two words can sum it up: financial reputation.
Are you paying all your creditors on time?
Are you indebted to your creditors too much?
These are just some things out of many that affect your financial reputation, also known as credit score. The better the credit score, the better loans.
It's worth addressing attention that credit score and credit report are not the same thing, although they are connected. Your credit score is just a specific number given by the major credit bureaus (they use a complex mathematical formula) and it is configured to show to lenders the level of risk taking you on as a debtor. A credit report is the summary of your credit history such as who you owe and how much.
Now how does a credit score and credit history affect your life?
- Ability to finance a car
It would not feel good knowing you can't buy a quality car because your credit score is not good enough
- Ability to purchase a home
The same concept applies to a real estate purchase. Most mortgage lenders are strict on credit scores and having a good one can mean a savings in the thousands over the course of the loan
- Employers are now looking at your credit score and history
Looking for a job? Well having a good score can help you land that job, and in other words having a bad one can prevent you.
- Landlords also check your credit history and score when renting an apartment
Getting a quality property to live usually means good payment history and that reflects in your credit history. Landlords want a punctual tenant, which means people who pay on time.
Hopefully, you're scared straight into making sure your credit score and credit history is good. If you want to get a copy of your credit report, you can request it at Trans Union, Equifax, and Experian and it will be free of charge (they usually offer this once a year). You can obtain your FICO score online from a variety of other institutions for a cheap price.