Credit scores and reports are what can help turn the house of your dreams into the home that you live in. Having a score in a certain range provides limits that you may not want to set for yourself. So the importance of being able to check your score allows you to know where you stand before you need to make a purchase.
Before understanding why it’s important to check your credit score, it’s a good idea to know what your credit score represents. Basically, your credit score is a number that gauges how likely you are to repay the amount that you’ve borrowed. It takes into consideration the debt that you have, your payment history, the type of credit you already have and the length that you’ve had that credit available to you.
A credit score can fall anywhere from 300 points to 850 points. A score of 600 or lower makes you a high-risk consumer. A high-risk consumer is either not eligible for loans and/or will receive loans with high-interest rates. A 650 credit score will put you in the fair category and a score that lands above 800 will give you an exceptional rating.
It’s beneficial to know what your credit report, not just your score, says so you can see why your credit score is either high, low or average. You’ll know before applying what debt you still have, how much you owe and have a general understanding of whether or not you’ll be able to get what you want.
Checking your credit report every year allows you to be able to see what accounts have been opened in your name or with your information. Identity theft is something that happens each day to unsuspecting people. The way to protect yourself from this is to monitor your credit report and score for any changes that you did not make or authorize. If you notice something suspicious, you can dispute it.
Not only is your credit score important to lenders, but it can also be a factor in your employment opportunities. For instance, if you’re applying for a job in the finance industry, an employer might want to know how well you handle your personal finances. If you can’t manage your own finances and have bad credit, they might not want to hire you to manage their business’ or someone else’s finances.
Further, there’s a term called “credit-based insurance scores” that auto insurance companies use to determine how likely you are to report a claim. Reporting a claim means the insurance company will lose money because they’ll have to pay for damages for any accident you’re involved in. They use credit-based insurance scores to set your premium thereby minimizing risk to insure you.
If you’re worried about the costs of receiving your credit rating, don’t be. There are so many online services through which you can learn where you stand fairly easily at no cost to you. You simply have to sign up for these services which should only take a few minutes. Major credit card issuers like Discover, Citi and Capital One allow you to view your score for free as well. Just sign up and get your credit information instantly.
Everyone should know and monitor their credit score periodically. Understanding this number can be the difference between a great purchase with low interest or huge financial obstacles.