Understanding Credit Ratings: Importance & Impact on Your Finances

Anytime that you apply for credit, whether it be for a credit card, auto loan or home loan, a lender will review your credit report and determine your credit rating. The higher your rating, the more likely you are to qualify, as well as to nab higher loan amounts and lower interest rates. A high credit rating can offer you a degree of financial freedom that those with a low rating may never see.

Home Loans

Your credit rating will most likely determine whether or not you become a homeowner. Home loans, home equity loans and re-financing are only made available to those with a good credit rating.

Renting

Your credit rating may also impact your ability to rent. When a landlord conducts a background check, he often looks to your credit rating before determining whether or not to approve your application.

Credit Cards

Nowadays, having at least one credit card is almost a requirement. A good credit rating will not only ensure that you can get a credit card, but it may qualify you for instant credit with low interest rates. There are a number of credit card perks for those with a good credit rating.

Purchasing

Some businesses won't accept anything but credit cards. Without a high credit rating and the ability to get a credit card, you may be missing out. For example, many airline companies only accept credit cards on board the aircraft.

Saving Money

A high credit rating may save you thousands each year in interest and other fees.