Why Your Credit Score Matters
You may think that your credit score only matters when you’re applying for a new credit card or a loan, but think again! Over the course of your lifetime there are many others who will use your credit score to get a pulse on your financial health and use it as a core decision-making tool to determine if you’re a good person to do business with.
Who Checks Your Credit Score?
Banks and financial institutions
Banks and financial institutions are often the first stop for consumers who are looking for larger-sized financing such as a mortgage, auto, or small business loan. To get a loan you will likely spend hours filling out paperwork and gathering information that the bank requests on your application, and your credit score is one of the key factors they use to determine your risk level. A solid credit score positions you for a better chance of being approved for the credit you need and for getting a lower rate, which can mean hundreds or thousands in savings. A sub-par credit score signals that you’re a higher risk borrower, which could result in getting a loan offer with a higher rate, or being denied altogether.
Credit card companies
Credit cards are useful because of their convenience for paying for everyday purchases. It’s pretty easy to get a credit card, even if you have a poor credit score or no credit history, but your options will likely be limited. Without a strong credit history or credit score, you may only qualify for high-interest credit cards, be required to pay a deposit to the credit card issuer, or there might be an annual fee – all things that take money out of your pocket.
On the flip side, with a high credit score, you may qualify for credit cards that reward customers with sign up bonuses, cash, points for other perks, entry to airport lounges, and more. Start building a robust credit history of on-time payments early on so you don’t miss out getting access to the best credit cards and rewards.
According to 2017 Federal Reserve Bank of New York data, the population of people who seek auto financing has grown astronomically –107 million Americans have auto loans today compared to 80 million people in 2012. That translates into an estimated 43% of the U.S. adult population working to pay off car loan debt.1 While you could get a car loan from a bank, many people end up going through the car dealership for financing because of the convenience and the ability to drive away with the car right then and there.
Your credit score can be one of the best negotiating tools for getting a great rate on a car loan, yet, many people don’t even know their credit score. For most Americans, buying a car is the second largest purchase they’ll make in their lifetime right behind their home, and a strong credit score could help them save hundreds to thousands of dollars in interest.