Why Credit Scores are Important
Whenever we talk about “Why Credit Scores are Important”, we discuss how our FICO scores determine our credit worthyness. Our FICO credit scores determine what we pay in terms of interest rates for any loans, credit cards, or even store and gas cards that we may apply for in the future.
A good credit score will result in the credit bureau helping us get our loans faster.
A bad credit score will result in the lender offering a choice of credit products geared to different risk levels.
Most lenders have their own guidelines, so if one lender turns you down, another may approve your loan but you are likely to be repaying that loan at a higher rate of interest.
The use of credit scores gives lenders the confidence to offer credit to more people, since they have a better understanding of the risk they are taking on.
Our credit scores can be given almost immediately to lenders. 20 years ago you had to book an appointment at the bank and then return a few days later to find out whether your loan has been approved.
Those days are gone forever with the advancements in technology giving lenders instant access to our credit scores.
Credit decisions are fairer with the current credit scoring system and your previous credit “mistakes” count for less over time.
We should all know what our credit score is. There is actually no reason not to know with the three major credit bureaus obligated to issue each of us with a free credit report each year.
Knowing your credit score gives you the opportunity to improve it and dispute anything on your credit history that you think has been recorded incorrectly.
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