How has credit score improvement changed the world for the better?
We all know how important credit scores are to getting the right financing to buy homes, cars, and other things we need in life, but did you understand that improving your credit score can improve your life in different ways?
To demonstrate this concept, here are five ways credit score improvement has changed the world for the better.
1) Credit Check
The credit check is probably one of the most significant changes to happen in today’s world. When we make an important purchase like a car or house, our credit score determines whether or not we can take out a loan and what interest rate we get. Thanks to all these checks, we no longer have to worry about getting taken advantage of by shady salespeople. When your credit score improves, so does your life! With lower rates and more available loans, you can live a much more comfortable life. Imagine if everyone had a higher credit score: imagine an economy full of people paying lower rates on their homes, businesses with lower borrowing costs, and government agencies with increased tax revenue from happy homeowners. It may sound far-fetched now, but credit scores are improving society every day! Meanwhile, consumers are becoming savvier about their spending habits because they know that banks will closely look at them before approving large loans.
2) Student Loans
If you’re one of those who have seen their credit score improvement due to decreased debt, you can thank student loans. You see, student loan debt is tricky because it doesn’t reflect on your credit report until after they fall behind on payments. And if they go into default, then your score will take a hit. But even when in repayment, sometimes paying your student loans off isn’t always possible—especially when other financial obligations like rent or bills get in the way. This is where The Fair Isaac Corporation (FICO) comes in. Their research suggests that non-mortgage-related debt may negatively impact your ability to qualify for mortgages and auto loans; however, lenders may consider no credit card balances highly desirable. To avoid owing money to many institutions at once (which can make life difficult), prioritize paying down high-interest debts like utility bills and phone bills before making monthly installments toward credit cards.
3) Auto Loans
Car loans are what makes auto ownership possible—but they’re also one of two things that will pull your credit score down. When you take out a loan to buy something, your lender will report that activity to one or more of the three credit bureaus, which hurts your score. The good news is that it can be just as easy to repair your score by making on-time payments on time. This simple habit pays off big when it comes time to take out another loan. For example, if you have an outstanding car loan with an average interest rate of 6 percent, your payment would be about $380 per month ($2100 annually). If you’re able to keep up with your payments in full and on time, here’s how much money that little habit could save you over five years:
4) Mortgage Lending
Mortgages are one of those necessities in life that require a credit score. Thankfully, your mortgage company will look at other factors besides just your credit score when determining how much you’ll pay on interest rates. However, even if you have excellent collateral to back up your loan, having a low credit score can make it more challenging to get approved for a mortgage. As one of the most significant purchases people make in their lives, it’s essential to do everything possible to increase your credit score before applying for a home loan. That way, getting pre-approved is an easy process, and you can lock in low-interest rates while avoiding putting yourself in debt with high fees and balloon payments. When shopping around for homes, remember there are plenty with lower monthly payments without raising your risk with an adjustable-rate mortgage (ARM).
5) Business Loans
While credit scores may not be a perfect reflection of personal character, they are often used to determine whether you’re likely to pay back a loan—making your credit score one of your most important assets. More than 90 percent of employers use an applicant’s credit history in some capacity when making hiring decisions. That means building and maintaining a good credit score is more important than ever if you want to advance in your career. Boosting your credit score by just 20 points could earn you $160,000 over 30 years on a $400,000 mortgage. Here are five ways credit score improvement has changed our world for the better.