Why It Is Important For A Person To Check Their Credit Scores Today
Posted: June 14, 2015
Today, it is more important than ever for one to take care of their financial health. And part of that process is staying on top of what is in your credit file by reviewing your credit report and scores on a fairly frequent basis.
There is little that you can do in life today that isn't based on your credit scores. You can't buy a car, a home, car or house insurance, get a cell phone, rent an apartment, get a bank loan or get a credit card without your credit scores having an impact on what you want to do.
In many cases having cash in the bank or in hand won't get you what you would like to have if your credit scores are too low. For instance, let's say there is an apartment that you would really like to have and you have the money to pay the deposit and first and last month's rent but the rental management company's policy is that an applicant must have a certain credit score before they will be approved, then your money won't get you into the apartment if you haven't been diligent in maintaining a good credit rating.
Low Credit Scores Will Cost You Money
Let's say that you can afford to pay cash for that new car you would like to have or, even just need to get to work every day. Then you will have to purchase insurance in order to be able to drive the car. More than likely you won't be denied insurance but you will be charged a hefty premium for insurance on the car if your credit rating is low. This additional premium that you will pay, each year, is money that you could use to have other things in life that would certainly bring more pleasure into your life than giving it to the insurance companies.
To get a new cell phone it may require that you make a deposit for the phone service if you have a low credit rating. Once again this is money that you could otherwise use for something else that you would like to have if you had just had a better credit score when you applied for the cell phone.
With the crack down on the mortgage industry approvals for mortgage loans requires a much higher credit score than it did just a few years ago.
Many employers check credit reports today before hiring or even promoting an individual. A good credit history is viewed as an indicator that the individual is of good character and manages their finances well. If a person repays their debt in a timely basis then this shows that the person is a man or woman of their word and follows through on what they say they will do.
Credit card companies will often approve a credit card for someone but will charge a much higher interest rate on all purchases if the person's credit scores are lower. Because the person is considered a higher risk for default they feel that they have to collect enough in interest to offset any unpaid debt at the time of default.
What Credit Rating Is Right For You
So, what is a good credit rating and how do you know if you have one? Different creditors have different requirements but in general you should strive to have a credit score of 640 or above. A cell phone provider or credit card company may not require as high of a credit score as say a car dealer or mortgage company. The higher the amount borrowed, the higher the risk by the creditor and thereby the need for more assurance that the borrower will indeed repay the debt in a timely manner.
What Does Your Credit Rating Look Like
To know what your credit history looks like then you will need to obtain a copy of your credit report and credit scores. You may get a free copy of your credit report once a year by going to the government mandated website www.annualcreditreport.com. This does not however give you your credit scores and unless you have special circumstances you cannot retrieve your credit report but once annually.
With a copy of your credit report though you will be able to view what has been posted to your credit file by your previous creditors. When you borrow money or purchase something on credit, the creditor can report your debt and payment history to the credit bureaus where it is recorded in your credit file with that credit reporting agency. When you apply for new credit with another creditor then they will obtain a copy of your credit report to see how you have handled any previous credit that has been granted to you.
The credit reporting agencies use all this history that is in your file to calculate a fico score for you. If you have made all your payments on time that will impact your score in a positive manner. If you have been late on your past payments that will impact your score in a negative manner.
If your debt balance is too high compared to your available credit then that will affect your score in a negative manner.
There are many different details concerning your past debt activity that can impact your credit scores in a positive or negative manner.
Posting errors can have an impact on your credit scores. This is another reason that you need to keep a close watch on what is in your credit file. Correcting any of these type of errors can take months so you don't want to wait until you need your credit rating before you know that these errors exist.