Why A Good Credit Score Is So Important?

A credit score is a numerical depiction of your ability to payback debts, based on your financial history. This can often be the single most important three digit number impacting multiple facets of your life. Your FICO score (Fair Isaacs Corporation) is often considered by most sleuths as the accurate depiction of your financial behavior. The three credit reporting agencies are Experian, Equifax and TransUnion and they calculate the credit score of an individual based on their distinctive statistical method.

A credit rating can be in the range of 300 to 900 with both ends of the spectrum being almost impossible to achieve. Normally, the average credit score is in the vicinity of 740 to 800 with anything above 690 considered to be excellent and anything below 619 relegated as a poor credit score. Several factors go into the makings of your credit rating like your payment history, recent paid bills, bankruptcy and foreclosures.

The lower your score the more reluctant the lenders will be to give you a loan. However the power of your credit rating transcends the realms of personal financial behavior and a poor credit score is often interpreted as a sign of irresponsibility. So a less than perfect credit rating will not only have a bearing on your ability to procure loans but many employers also choose to get a credit score check done for their prospective employees. Even though many people regard this as an invasion of privacy, employers argue that a good credit rating can simply be an indication of how responsible, dependable and trustworthy a person is.

Even though most lenders would decline the loan application of a person with a bad credit score, this includes mortgages, credit card and personal loans; if you do manage to get a loan, you will be charged a substantially higher interest than the average Joe with a good credit rating. Even when you buy insurance coverage your premiums will  be higher. Not only this but also if you want to rent a house, the landlord may base his decision to rent out the house to you solely on your credit rating.

With so many far reaching consequences of the blemishes on your credit rating; it is best to take all possible measures to ensure a good credit score.