1. Putting people to sleep.
2. Images appear of impending doom with the FreeCreditReport.com guy singing in the background.
I’m here to tell you to snap out of it! Knowing your credit score is probably one of the most important things you can do on your journey to financial freedom.
You may not have noticed this yet, but your credit score matters. It can basically run your financial life.
Yes, those three numbers can easily determine the outcome of so many of life’s big purchases. From student loans to buying a house – it’s very important to make sure you have a healthy credit history. An undesirable credit score can hinder a lot of plans.
How is this possible? Your credit score is a culmination of your credit report. It shows a history of how you’ve paid your bills, how much credit you have open and how much money you still owe.
Furthermore, your credit report shows whether you’ve had a judgment against you, any claims you’ve made or if you’ve had your wages garnished. Those three numbers that make up your credit score are pretty much your overall grade in the department of borrowing money – a grade that shows lenders how likely you are to repay a loan. So yeah, your credit score matters, a lot.
So my credit score matters, but how does it affect me?
Interest Rates on Loans
There may come a day when you need to take out some sort of loan – like a car or student loan. Your credit score can determine how much interest you’ll be paying on the loan. The lower your score the less interest you’ll have to worry about and vice versa. In other words, a healthy credit score can actually end up saving you a ton of money. And who doesn’t like saving money?
(P.S. If you’re in a position where you need to refinance your student loans, check out my review of SoFi.)
Getting A Loan Period
For some loans, credit scores can determine whether or not a person can even get approved to borrow the money. This alone is a pretty good reason as to why you should keep a healthy score.
Rent Or Mortgage
If you’re looking to rent a place the landlord will probably ask to look into your credit. If you’re trying to buy a house the bank will be looking into your credit history now more than ever.
The better your score the more likely you’ll get approved by a landlord or the bank. Furthermore, if you get approved for a mortgage your credit score will also determine how much you will be paying in interest.
Getting A Job
When I worked in recruiting, sometimes job candidates would get insulted when asked about their credit.
Sometimes companies look into credit histories so get used to it. This isn’t necessarily something new, it’s been pretty standard for banks and other financial institutions for quite some time, however since the Recession more and more companies are following suit.
The logic may be a bit flawed in the approach because bad credit doesn’t mean you’ll steal money. But companies feel more comfortable hiring people with good credit. Having a solid financial history shows companies that you are responsible with your money so you’ll probably be responsible with theirs.
It should also be noted that an employer won’t be able to see your actual score, but they can see your entire credit history so it’s in your best interest to keep it healthy.
Many insurance companies are now pulling your credit to help determine how much you’ll be paying in your insurance premiums.
Simply put, your credit history helps a company predict how likely you are to put in a claim. For instance, with auto insurance companies there seems to be an increasing correlation between how responsible people are with their money with how responsible they are on the road. Granted, a good credit history may only save you $15.00 here and there, but over time this can add up to a lot of money.
Credit Resource – Credit Sesame
If you’re in need of improving your credit, then you need to keep track of what you’re doing to improve it. What gets measured gets improved, and using secure and safe tools helps you measure one of the most important aspects of your financial life.
One of my favorite tools for doing this is Credit Sesame. It’s 100% free to get started and they offer all of the following:
- Free credit score, report card and monitoring alerts.
- Free loan analysis and recommendations.
- Free financial tips and tools.
In addition, they also offer these cool features:
- Free identity theft protection.
- An analysis of what is impacting your credit score.
- An analysis of your financial health.
- Tips to improve your financial health.
- Different financial options you can choose from to improve your finances.
- An analysis of your finances over time.