Of the various numbers that are associated with life, the credit score is one of the most important of them all. They have an impact on how your future could look like because this number is a reflection on your capacity and capability.
What is a credit score?
A credit score is a number that will reflect your credit risk level. A higher score implies that you are a reliable person because you can pay your loans and debts on time. The lower the number, the lesser the chances of you getting a low-interest loan.
How is the credit score generated?
This number is calculated with the help of statistical models that apply the elements in the credit report. The credit score is not a part of the credit report as it is a fluid number. It is liable to change in time and hence has to be taken at the time it is needed.
For example, when a loan is to be taken, the money lender generates it with the help of the digits in the credit report and uses it to decide whether it is safe to give a loan. The credit score is very important because your entire career could depend on it. Everywhere you go, this number can be used to decide how reliable a person you are. For more details click here.
Maxing out your credit cards and not paying the bills on time has a direct impact on the credit score. The level of debt and the amount of money due on the card is a sign of your financial ability. The credit score will be messed up when what is due is not paid on time.
There is a high-interest rate on the loans and credit cards.
The lenders and the banks see a low credit score as a sign that their risk is higher. In order to compensate for it, they will charge a higher rate of interest. You are being charged for their risk rate. The cost is also higher when the credit card balances are higher.
Getting an apartment or even a postpaid connection for your cell phone will become hard. Landlords check the credit history before signing a lease.
Loan applications will not be approved. Creditors and lenders are not happy sanctioning a loan to someone with a high credit risk. They will be denied, no questions asked.
Security deposit is charged upfront when you cannot establish utility services in your name. Utility companies such as electricity and cable also check your credit history during the process of application. Bad credit history implies that you have to pay a security deposit in order to establish the service in your name.
Jobs in the finance industry or the upper management levels insist on a high credit score as part of the eligibility process.
Insurance premiums are higher too. They link low credit history to high claims and want to compensate for the same. The number of claims actually claimed is inconsequential.
Starting an own business is a mammoth task because everything from getting a land lease to a cell phone connection becomes a hassle. The basic facilities require a high credit score. Calls from debt collectors are on a high because they assume you are not capable of paying the dues because of the low credit history.