Reasons why Good Credit Matters

From a very young age, many of the financial decisions you make can have a significant impact on your credit. In today’s world where many people are getting more and more dependent on credit for several services or products, your creditworthiness should always be at the forefront of your financial dealings. Since poor credit could be a major hindrance to achieving your goals in life, maintaining good credit is crucial. Here are 3 reasons why good credit matters.

1. Major purchases

At some point in your life, you will likely want to buy a car or a house. In order to do this, companies will look at your credit score to get a sense of how financially responsible you have been in the past. Getting a mortgage loan to buy a house is getting increasingly difficult with shorter terms available and stricter policies in place. As for a car, unless you have enough money upfront to pay cash, you will also need to request a loan for your purchase.

When a lending company evaluates if you are a good candidate for a loan, it looks at your overall credit score but also if you have been paying all of your bills and making any other debt payments on time. Such history allows the lending company to see if you could be trusted in paying back a larger sum of money over several years.

2. Interest rates

There are very few loan options with zero percent interest rates. When such a loan is an option, it is typically offered to individuals with the best and highest credit scores. For any other regular loan, you will be required to pay a certain level of interest on the principal of your loan. If your credit is in poor condition and a lending company is willing to offer you an option regardless, chances are you will be asked to be very high interest rates. The better your credit rating, the higher chances you have of paying less interest.

3. Your credit follows you for life

This is strong statement but one that could not be more true. It takes years to build good credit and it can be taken away very quickly if you do not maintain good financial practices. For example, if you miss payments on bills or loans, default on loans, or even declare bankruptcy, this information stays on your credit history for many years to come and will impact your life and the choices you are forced to make due to bad credit.

Good credit matters because it will make making major financial decisions much easier; you will not be limited in terms of what you wish to purchase (within reasonable limits), and when you do require a loan, you will be offered the best and most reasonable loan and payment options. It is definitely in your best interest to pay close attention to your financial dealings and ensure you are in good standings throughout your life.