Having a good credit score is something that many people obsess over. Having the highest credit score possible dictates the types of credit cards you can get, or your ability to get a loan. In today’s society, more businesses are stressing the importance of having good credit. But why is it important to have a high credit score?
Buying A House
Companies that offer home loans, like Lending Tree (NYSE: TREE), look closely at your credit score before offering you a loan. If you have poor credit, it can be harder to get approved for a loan, or the interest rate might be higher than average.
Even if you aren’t in the market for buying a home and want to rent, having low credit might make it more difficult for you as well. You might be required to put down a larger deposit, or not be accepted at all.
Buying A Car
Unless you have enough cash in your pocket to buy a car, you will have to take out a loan. With a history of low credit, the lender might think it's risky to give you a car loan. For those with better credit, the loan amount tends to be larger, and with a better interest rate. A lower interest rate means you have to pay less each month than someone with a higher interest rate.
Starting A Business
Some people aspire to open their own business, but most businesses take quite a bit of money to get started. Many new business owners have to take out a small business loan, and once again, good credit is necessary to get a larger loan and lower interest rate.
Getting A Cell Phone
It might not seem like bad credit could affect your ability to get a cell phone, but having good credit can help. Cell phone providers might not want to risk giving you a contract, so instead, you would have to opt for a pay-as-you-go plan. Often, you have to pay more money for the same phone and plan. People with higher credit won’t have to pay a security deposit, and may even get access to discounted phones.
When you have a lower credit score, you might have to pay a security deposit of $100 to $200 on your utilities. This charge can quickly add up and be an inconvenience when you are dealing with the expenses of moving homes. Those with higher credits won’t have to worry about this added fee, and can move more easily.
Your ability to pay bills is part of what dictates your credit score. Landlords, utility providers, mortgage lenders, and even cell phone companies take a look at your credit. Maintaining a high credit score is important to ensure your fees and payments are kept to a minimum.
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