Credit is an important component of today’s economy. Whether you want to obtain a personal loan or financial assistance for your studies, having a good credit rating is necessary to obtain a loan on the best possible terms. A good credit score helps you manage your finances better and helps you save money in the long run. Keep scrolling to learn why establishing and maintaining a good credit rating is imperative.
People with bad credit may have a harder time getting loan approval. Even if their application is approved, the lender will charge higher interest rates and a hefty amount in service fees. On the other hand, people with a good credit rating have a higher chance of getting their loan approved. However, depending on the type of loan, the lender may look at other aspects such as your debt-to-equity ratio, the value of any collateral you provide, your employment history, your credit history and the down payment you are able to to pay.
Lower interest rate
As mentioned above, it becomes easier to negotiate better loan terms and get lower interest rates when you have a good credit rating. You will also pay a lower service fee. With lower interest rates, it becomes easier to repay the loan on time, which translates into better financial management.
The amount you can borrow depends on your income and your credit score. Banks, private lenders and companies providing credit cleaning services emphasizes improving credit rating as it not only gives you bargaining power but also puts you in a position where you can ask for higher amounts. Loans for bad credit are also available, but the borrowing capacity is limited.
Easy property rental
Most landlords and landlords consider credit scores before renting out their property, especially if you’ve ever faced eviction for not paying rent on time. The best way to ensure you never run into any problems in the tenant selection process is to repair your credit score and avoid the hassle of finding a landlord who might accept a tenant with bad credit. There are tons of credit repair companies that provide services to help restore your credit score. It is always best to choose a credit repair company that is reliable and has a good reputation in the industry in order to get the best possible results.
Mobile phone contracts
People with bad credit find it difficult to get a cell phone service contract. Cell phone service providers avoid give contracts people with a low credit score. Instead, you will be offered a pay-as-you-go plan where you pay upfront to use cell phone services. The network provider may also require a security deposit for people with bad credit. On the other hand, people with acceptable credit scores may not be required to make a deposit and may even get a reduced price on the same plan.
Credit rating is the first thing auto loan providers check when offering auto insurance services. These insurance companies use credit score and your insurance history to determine the insurance risk score. If the insurance risk score is higher than normal, insurance companies will charge you higher insurance premiums.
Whether it’s your insurance provider or your landlord, having a good credit rating means you’re able to negotiate lower interest rates. Most insurers, lenders and credit companies offer better services to customers and may even offer discounts and exclusive offers.
Find a job
Most companies and businesses check credit reports to assess whether or not potential employees are able to demonstrate financial responsibility. Credit reports are not the same as credit scores, but they provide employers with valuable information such as credit history, previous credit applications, and outstanding debt. Using these metrics, employers will decide whether or not to hire you. However, several recently introduced regulatory laws prohibit employers from evaluating a person’s credit history.
Utilities can only be established when you have a good credit rating. Before supplying you with electricity, the electricity service provider will check your credit score and may be reluctant to provide service if you have a bad credit score.
Maintaining a good credit rating is an achievement you should be proud of, especially once you’ve worked your way up. We hope you find the reasons we’ve shared helpful and enjoy the benefits of a good credit rating.