Knowing your credit scores and all the necessary information about them have always been part of adulthood or in today’s popular term, “adulting.” It remains a choice on whether you should let yourself be fully aware of this concept or not. Having ignorance about credit scores is not the same as having ignorance about the law. Some people argue that they do not need to know about these details since they are never going to apply for a loan, reason why they skip on learning about this. If you choose not to learn about them, it is okay but ignorance about them can have great impacts as you build your life in the future.
Credit scores are more than just about loans. So even if you are not planning to apply for loans either to buy a new house or a new car, it pays a lot to know about this essential financial concept.
To give you an overview about what these ratings are, you may compare these to the grades you have received in school. Before you entered adulthood, one of the only numerical figures that you are concerned about are your grades. It determines your academic performance and also paints a good picture of how you conduct yourself in school.
Credit scores are also numerical figures given to individuals, businesses, and even countries – the United States for instance has a credit score in the world market. It is given by certain organizations and these groups stand as the “teachers” who give out the “grade.” A great way to monitor and keep track of your score is through the Credit Sesame app.
- The difference is that, unlike academic grades that relatively do not tell about the future you can get – since even those who flunked in school can still become a wealthy and successful person – credit scores can greatly impact your future.
- These are three-digit numbers that tell you how you have performed financially.
Here are the top five things that you should know about these ratings.
- Getting A Loan Depends On Your Credit Score If this is your first time to come across with financial loans, then you have to know that it is not easy as apply-and-go. This means that a person wishing to receive loans does not mean that he or she automatically can be granted because not all loans are approved. Sometimes, it may depend on his or her credit score.
- Your credit score are viewed by banking institutions and lending corporations as they approve your loan applications. They may either constitute loans for buying a new house, purchasing a new car, or providing for the immediate needs of your family.
- Loans have interest rates and when approved, the financial institutions will also have to decide on how much interest rates to include with the transaction. Those who have earned a good credit score will be charged with lower interests than those who earned a bad credit score. The same thing goes when you apply for credit cards.
- Your Credit Score Comes From Credit Reports, And There Are Factors That Determine Them The question on where you can find your credit score might pop in your head as well. The answer is on your credit reports, the “report card” of these financial transactions that you had in the past. There are several credit companies that may show you the financial performance based on some payments you have made in the past. The law makes sure that companies are able to provide them accurately and that clients are able to obtain access to them every once in awhile. These reports will be the basis of many lenders and banks about the approval of your requests.
- Some of the factors that make up these ratings include your transaction history, the money that you currently owe, the duration of your credit use, the number of your accounts, and existence of new credit. The transaction history, which constitutes paying your bills on time, makes up the most of these reports.
- Employers Check On Your Credit Score When You Apply For Jobs Did you know that credit scores are also viewed by your employers when you apply for work? Employers often can base their decisions on hiring you depending on this information. Credit scores tell a lot of a person’s spending and investing habits, and especially if you apply for finance-related jobs, this is a make-or-break factor when landing on a job offer.
- Of course, entry-level professionals or fresh graduates still do not have a high credit score but your first employers may take a look at your rating from the student loans that you have been involved with.
- Moreover, the credit score is also viewed by landlords when renting an apartment or by sellers when buying new gadgets in terms of credit or installment.
You Can Always Improve Your Credit Score
Your credit score is not a one-time rating like student grades. Unlike those you get from college, you can be able to work it out and improve these figures. These may change and may differ according to the institutions that provided the report and other factors. Financial experts tell you that improving this score requires you to be responsible about using credit. Along with the good habits of spending money wisely, it involves paying back on time and planning your finances well.