Why Good Credit Matters

Being judged by a number and not knowing what that number is for can be a terrifying prospect. The great news is that all you need to know about your credit score and how it is arrived at is just a few mouseclicks away.

The most important thing you should find out is what a credit score is, and what it is used for.

There are five items 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. These facts are then computed by financial institutions, most notably the three major credit bureaus (Experian, Equifax, and Trans Union). Your credit score then becomes the thing by which certifies your risk factor in terms of loans and other financial matters.

What most people don’t realize is how many things in their life are limited by their credit score, such as:

1. Finding a Home

- Obviously, having a good credit score will be in your favor if you are planning to purchase a house with a mortgage

. But you may not know that even landlords have the right to check out your credit rating to verify your qualification as a tenant. Your future landlord would want to know that you are not the sort who does not pay bills on time, or that you are too extended to pay rent.

2. Getting a Car

- Just like obtaining a mortgage, purchasing a car with a car loan requires you to have a good credit score. Otherwise, you may lose the likelihood of getting that dream ride.

3. Starting or Expanding a Business

- Capital is what you need if you wish to start up or expand your business, and you can obtain these funds by applying for a loan. Your credit rating will be used as the basis for judge the rightness of taking a risk on you and your business.

Are you starting to catch on to the theme here? Here are two more seemingly unlikely things that are guided by your credit score:

4. Finding a Job

- Many employers look up your credit score as part of your pre-employment background check. The idea 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 patron you are. Other services such as cable, internet, and even your cellphone provider will also do a credit check before approving your application. Of course, the application of this is usually seen when you hope to be approved for a credit card. Your application and your potential credit limit hinge upon your credit score.