It's obvious that having a good credit score versus a bad credit score may impact you when applying for your loan but do you know the full extent of the damage a bad credit score can cause. Find out the impacts and how to solve credit score problems.
If you Google the phrase 'credit score' and look at the huge number of results it is clear to see that there is a huge market for finding your credit score and improving it. The reason for this is due to the ever increasing importance credit scores have on our lives. The impacts can reach far beyond access to loans and may impact your access to insurance or even getting a new job!
In truth, your credit score holds a much larger influence on your life than you may realize. Credit scores are hard to escape and will be with you throughout your life. This will influence the interest rates you pay on purchases through to approval for major loans such as a home loan. Once you realize how important your credit score can be for your financial portfolio and lifestyle, it's integral that you take steps to understand and improve it as much as possible.
Your credit score is your financial report card. Whether is good or bad, any financial document under yoiur name is going to impact your credit score. On the other hand, it's actually possible to have a low credit card even though you've never been in debt if your young and have not built up a credit history through the use of credit cards or other finance.
Credit cards can be either your best friend or worse enemy with your credit score. If you are only just starting out on your own and don't have many financial records or documents to your name then it's often suggested to get a low rate credit card and put through a few transactions each month to build up your credit file. By establishing a low-interest, low limit credit card, you can start to build a strong credit history by paying off your bills each month. In addition, putting your name on the utilities or establishing a good record of payment with your rent or mortgage can also increase your credit score. When you apply for a credit card in the future or wish to lower the interest rate on your current credit card, your credit company will first look to your credit score and payment history. If both of you have a good credit score then you are likely to benefit from a lower interest rate.
You may find yourself rejected because of a low credit score caused by falling behind on your loan repayments or holding excessive amounts on your credit cards. It's important to understand that using a credit card wisely can help you, but taking advantage of the credit card debt will destroy your credit score in the long run, affecting numerous future financial purchases.
When you go to buy a home, for example, the bank providing the home loan will consider your credit score before approving your loan or giving you a lower interest rate. In addition, if you plan to purchase a new car in the future, the car loan amount will also depend on your credit score.
It can be life changing to take a positive stance and be in control of your finances by understanding your credit score and how to improve it. Don't put it off, make sure you start putting these tips into action today.
Richard Greenwood is a consumer finance expert and head of The Click 4 Group who run a number of financial comparison sites comparing savings account products from leading banks including Bankwest savings.
