Step 48

Being judged by a number and not having a clue as to what that number is for can be a terrifying prospect. The good news is that all you need to know about your credit score and how it is arrived at can be found online.

So what actually is a credit score, and why is it so important?

There are five things taken into account when formulating your credit score: your payment history, the total amounts you owe, the length of your credit history, the type of credit you are using, and any new credit you apply for. This information is then compiled by financial institutions, most notably the three major credit bureaus (Experian, Equifax, and Trans Union). The outcome is then used to determine your viability as a lender, among other things.

What may astonish you is how many other things in your life are shaped by your credit score. Among these are:

1. Finding a Home

- Acquiring a mortgage

can go with few, if any, complications if you have a good credit score. But did you know that your landlord can also use your credit rating to help him establish that you will be a good tenant? He will want to ascertain that you pay your bills faithfully and on time, among other things.

2. Getting a Car

- Just like securing a mortgage, buying a car with a car loan requires you to have a good credit score. Without a good score, it’s unlikely that you will get approved for a sizeable car loan.

3. Starting or Expanding a Business

- Any business, big or small, has to have capital, and it is normal to try start or expand one by acquiring a loan from a bank or other financial institutions. Guess what they’ll use to decide if they’ll lend you and your business money? Your credit rating, of course.

Is it all becoming clear to you? Well, here are two more things that you may not realize can be affected by your credit score:

4. Finding a Job

- It may seem unnecessary to you that your prospective employer may want to get an idea of what your credit score, but many do. The logic behind this is that how you handle your finances can be seen as a reflection of how responsible and reliable you are when it comes to your job.

5. Other Products and Services

- Utility companies also check out your credit score to see what type of customer you are. This list includes services such as cable, internet, and cellphone accounts. Of course, let’s not forget the matter of getting a credit card. Most of all, your credit score is used as the basis for approving or denying your application, as well as your credit limit, if you do get a credit card.

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