Whether you realize it or not, your credit score has a significant impact on your life. But what exactly is credit? Simply, credit refers to your ability to borrow money or obtain products and services. However, there is more to it than that. Here are some facts regarding credit that you might not have known.
A Good Credit Score Makes Life Easier
If you have a goof credit score, it’s easier to get:
- Job – 47% of employers check credit reports
The higher your credit score, the easier it is to borrow money at cheaper interest rates, which saves you money.
However, having high credit makes your life easier in other ways. It can help you with:
- Get a lower vehicle insurance quote. According to Consumer Reports, persons with bad credit spend $1,301 more for vehicle insurance each year than people with good credit.
- Access improved credit card benefits. Only those with great credit are eligible for the best benefits.
- Avoid paying security deposits. If you have terrible or fair credit, utility and cell phone companies may want a security deposit. By avoiding this step, you can save $100-$200 if you have good credit.
- Negotiate a lower car price. If you can be pre-qualified for an auto loan, you can bargain with the dealership just like someone who has cash. The dealership understands that if they do not cooperate, you will take your business elsewhere.
Rent and Bills have no Bearing on your Credit Score
You may believe that paying your rent and bills on time will assist you in establishing credit. However, the majority of payments made for rent and expenses are not reported to credit bureaus.
It makes no difference that you have never been late with your rent payment in all these years. Your on-time payments will not go towards your credit unless you employ a rent reporting service, such as Rental Kharma or Experian RentBureau.
Bad Credit is not Irreversible
Nothing, not even negative credit, lasts forever. Most negative information on your credit record is only kept for seven years. A few things linger a little longer.
- Hard inquiries: 2 years
- Delinquencies: 7 years
- Charge-offs: 7 years
- Student loan defaults: 7 years
- Foreclosure: 7 years
- Judgments: 7 years
- Bankruptcy: 7-10 years
Even if you don’t do anything to improve your credit, the dents on your report won’t be there permanently.
Bad Credit Mandates a Co-signer
Many people are unaware that having negative credit makes it difficult to borrow money on your own. A higher interest rate may be insufficient to satisfy the lender. Many people will expect you to obtain a co-signer. This indicates that someone else has agreed to cover the loan if you are unable to.
You have freedom if you have high credit. You can borrow money and obtain credit cards without the assistance of another person.