Whether you’ve built a solid credit score already or have one that still needs work, it’s important to know what ways your credit score affects you.
A recent WSFS Bank study of 2,005 Americans between ages 18-40 found that 36% of respondents felt building good credit was a financial goal out of reach for them and 78% said they weren’t good at maintaining good credit.
Your credit score helps determine your creditworthiness with lenders, and a solid score can help put you on a path toward purchasing your dream home, a new car and much more. A score around 700 is generally considered good, with anything over 800 being excellent.
Here are a few ways your score could be impacting you.
Mortgages and Loans
Your credit score helps lenders determine your dependability and if you’re likely to be able to pay a loan back. Your score not only impacts whether your loan application is approved, it also affects the interest rates and terms you receive when shopping around with different lenders.
When it comes to getting a mortgage for a home, a loan or lease for a car, or another type of personal loan, you’ll want to ensure you’ve built a strong score before applying if possible. The higher your score, the more favorable interest rate you’re likely to receive, which can help save you thousands over the life of a loan.
Similar to applying for a mortgage or personal loan, your credit score comes into play when you’re opening a credit card, impacting the interest rate and your credit limit for the account.
Building good credit can take time and a credit card is a good place to start. Your first credit cards are likely to have lower limits and higher interest rates while you build your lending profile, so it is important to ensure you pay off the full amount each month and only spend what you can afford.
Allowing a balance to carry over on your cards will cost you more in the long run in interest while also bringing your credit score down and potentially impacting other loan rates.
Your credit and information from credit reports can also impact a multitude of other items, including whether a landlord approves your rental application, opening of accounts with utility or cell phone providers, and whether an insurance company is willing to issue a policy to you and at what rate.
While potential employers don’t have access to your credit score, they can access certain details from your credit report with your permission in some states. Not all employers run these checks, but it is another reason it is important to maintain good credit.
Your credit score having such a large impact on a wide array of items only underscores the importance of building a strong financial acumen and confidence in your money management skills.
It’s never too late to build your financial repertoire and work to improve your credit score to achieve your financial goals. Start with small things like ensuring your credit card balances and other bills are paid in full each month to help keep your payment history and debt to credit ratio favorable.
If you feel you need more help building your financial knowledge, there are a variety of free resources available online, including interactive learning modules that can help you gain new skills or brush up on the basics to put you on a path toward your long term goals.
Helping you boost your financial intelligence.
Read our financial resources from your friends at WSFS.