If you need to borrow money for anything in the future, then you do well to pay close attention to your credit score. Your credit score is what lenders look at in order to determine if you are at risk of not paying them back for the credit that they afford you. At some point in your life, you might have to borrow funds. This being the case, you need to know the importance of a good credit score.
What is a Good Credit Score?
Your credit score can be any number from 300 to 850. Basically, if you have a credit score of anything lower than 670, your credit score is considered to be low. A low credit score is considered to be a credit risk. This means that lenders will either not borrow your money, or they will lend you the money with a high-interest rate. If you have a score of anything above 670, that is considered decent credit, and the closer that you get to 850, the better your credit score is.
Why Can a Bad Credit Score Be Problematic?
It can be problematic if you have a bad credit score because it can cost you money and possibly assets in the future. If you want to apply for a credit card, the company will look at your credit score. In case of a low credit score, you may not get the credit card, or they may charge you very high interest. This is the same if you want to buy a vehicle or a home. If you want to purchase a home and you have bad credit, the banks will most likely not want to give you a loan. If you do end up getting a loan, then they will give it to you at a high-interest rate. With a high-interest rate, you will be paying off your home for a longer period of time, and you will end up paying much more money than an individual who has good credit.
Now, you might be wondering, does applying for a credit card hurt your credit? The answer is, yes. When you apply for a new credit card, the lender has to make a hard inquiry on your credit, and this can cause your credit score to drop a few points, but it can go back up. At the same time, you do need to have a credit card in order to start off your credit, so it can be a catch-22. You would be wise to avoid applying for multiple credit cards at once. If you do, the lender will think that you are in dire straits, and you will most likely not get the card.
Unless you are extremely wealthy, you are going to have to use credit. According to the experts at Sofi Invest, you do well to keep track of your credit score. There are apps that you can use to watch your credit score, and you need to protect it at all costs because a bad credit score can ruin your life.