Everyone wants a good credit score, but why? Sure, you’re far more likely to be approved for a loan if you have great credit, but that’s an obvious advantage.
So what else might you get when you have a great credit score? Is it even something you should bother focusing on?
1. You’re not buying a house without good credit.
You’re going to need a minimum score of 580 if you want to buy a house with an FHA-approved mortgage.
Sure, you can always pay cash for a home, but it’s incredibly rare for a person to have that kind of money lying around. It’s even less likely if you’ve somehow found yourself with bad credit.
It’s also possible to be approved for a mortgage if you have a lower score, but you’ll need a substantial down payment and your interest rates will be through the roof, making it all but impractical to keep up with.
If you’re hoping to own a home someday, then having a good credit score is very important.
2. Good credit yields better interest rates.
Your credit rating is an evaluation of the potential risk you pose to lenders.
When you have a high credit score, you’re often granted a lower interest rate because it’s far less likely you’ll default on your loan.
When you have a bad credit score, it can cost you hundreds, thousands or even hundreds of thousands of dollars more.
If you like holding onto your hard-earned money, then having a good credit score is very important.
“When you have bad credit, it can cost you
hundreds or thousands of dollars more.”
3. Some employers check your credit.
At first glance, it might seem your credit score should have nothing to do with whether or not you’re employable. You spent years earning an education and developing your resume to prove that.
But many employers, especially those offering attractive positions and salaries, look at your credit card to see how responsible you are.
The theory is if you aren’t responsible enough to pay your bills, you aren’t responsible enough to work for them either.
Regardless of your feelings on the matter, if you want to have access to some of the best jobs on the market, having a good credit score is very important.
4. Low credit scores carry social stigma.
Do all of your friends have bad credit, too?
While it’s virtually impossible to prove, those with low credit are often looked at with suspicion by those with higher scores. They wonder how you landed yourself in such a position and may even see you as irresponsible.
There’s a reason people with bad credit scores try to keep that information to themselves.
If you’re worried about what others think of you, then having a good credit score is very important.
5. Bad credit costs a lot.
As stated above, bad credit leads to high interest rates, which will force you to spend a lot more cash over the long term.
If you have a bad credit rating and buy a home that costs the same as your neighbor, who has good credit, you can be sure you’re going to spend a lot more over the course of your mortgage.
Every extra dollar you spend on interest is a dollar you won’t have to put toward retirement. It’s a dollar you won’t have to go on vacation, pay for your child’s college education or simply enjoy at the local ice cream parlor.
If you value your hard-earned money and want to hang onto as much of it as possible, then having a good credit score is very important.
Photo source: wsj.net.