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A bad credit score can amount to tens or even thousands of dollars in interest payments.
If you have ever applied for credit (a home or car loan, for example), you already know how much your credit score affects your finances.
The amount of money you qualify for and the interest you will be charged are tightly linked to the single three digit number that is your credit score. As a result, your credit score likely ends up dictating the size and location of your home, the type of car you drive, and the money you have leftover for vacations or other luxuries.
If you have a low credit score, you will have a more difficult time getting a loan and the loans you do qualify for will weigh you down with high interest rates. Compared to people with good credit scores, you will end up paying more money per month just to pay off a loan of the same value.
A bad credit score affects more parts of your life than just interest payments.
Not only will a low credit score limit your ability to get approved for credit, but with increasing regularity, it can affect other aspects of you life. For example, many employers now request a copy of your credit reports when you apply for a job. Statistics show that credit scores correlate with trustworthiness so employers will use your credit score as a way of making a decision about your character.
In addition, in their quest to perfectly quantify their risk, insurance companies are beginning to incorporate credit scores into their insurance premium rates. The lower the credit score, the higher premiums they will require for coverage.
With all of the entities who consider your credit score, it is in everyone's best interest to make sure their credit score is as high as possible. Just in mortgage interest payments alone, the difference between a good interest rate and the high rate required for someone with a bad credit score can amount to many thousands of dollars over the life of the loan. On top of that, the person with a good credit score is paying less on other loans and may have the opportunity to work in a higher paying job.
You can take action to repair an unfavorable credit score.
Fortunately, you are not stuck with a bad credit score. Through careful management of your finances and by consistently living within your means, you can rebuild your credit history and as a result, increase your credit score.
You may also be able to more immediately impact your credit score through the process of credit repair.
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