The credit score is a numeric representation of your credit history or creditworthiness. It’s a number between 301 and 850 that pretty much defines your lifestyle.
The credit score is an indication of your loan trustworthiness. They control your life because they have a strong hold on your financial position. For instance, someone with a low credit score, let’s say 500, might not qualify for a personal loan. Even if they do so, the interest rate will be much higher.
However, your credit score plays an important role in defining your lifestyle, even if you don’t borrow any money. Here is how.
Impacts of Credit Score on Your Lifestyle
A good credit score is important, but what happens if you have a bad credit score? Well, for starters, you’ll have to pay a high premium on your insurance because you lost trust among financial institutions.
Moreover, you become ineligible to apply for loans because no bank would be interested in lending you money. In addition, your housing application might take a hit, including your security deposits.
In short, bad credit sets many roadblocks to everyday necessities impacting your lifestyle. However, there are financial institutions with loan for bad credit people.
Financing a House
It may not come as a surprise that you can’t apply for a mortgage with bad credit. But what’s alarming is that mortgage loan providers look at a much older version of credit score. Plus, the credit scores you see online are either Vantage Score or FICO.
Your true credit score is a reflection of your credit history. In simple terms, it’s a mirror of timely payments and adhering to your lender’s terms. You can get a mortgage for as low as a 500 credit score with a 10% down payment. As your score goes up, down payment decreases. But if you want low-interest rates, your score must be 760 or above.
Low Interest Means Better Lifestyle
Bank lenders and credit card issuing companies will evaluate your credit score before deeming you fit for a loan. The higher your score, the lower the interest rate because your loan partially depends on it. However, your household income, assets, history with the lender also play a crucial part.
Therefore, if you secured loans at a low-interest rate in the past, it means you pay your dues on time. Your lenders shouldn’t have any problems in decreasing your interest rate.
Moreover, a low-interest rate means you don’t have to pay exorbitant returns on your loan. Thus, the additional money shapes your lifestyle and improves your financial position.
Refinancing requires acquiring a new loan to pay off your old ones. It saves money and decreases your interest rate. For instance, if you acquired a loan with a 500 credit score, you can request refinancing services if your credit score improved or the interest rate decreased (maybe even both).
Refinancing works best for student loans because they are long-term. You can also use a personal loan for debt consolidation or refinancing high-interest credit cards. Since you apply for a new loan in refinancing, your credit score plays an important part.
If it’s high, your interest rate will fall and vice versa. So there is no point in loan refinancing if your credit score decreases, even if the national interest rate falls.
Buying a Car
If you take out a loan to buy a car, your credit score will determine your interest rate. However, there are other factors as well. Auto loans work similar to other loans, but the interest rate differs depending on the car you want to buy. For instance, you’ll pay a higher interest rate on a used car than a new one. Plus, your interest rate will decrease if you acquire a secured loan; this impacts your lifestyle because which car you drive depends on your credit score.
Securing a Job
Even if you are not borrowing money from any financial institution (bank, online lenders, credit unions, etc.), credit score won’t get off your back. Some employers evaluate your credit score to determine whether you are financially responsible. This scrutiny is conducted if you are applying for a senior post.
Even if you are employed, your credit score will impact your promotion. However, employers don’t count a sharp decrease in your credit score if you just took out a loan. But if your credit score is low because you missed your payments, you might have to wait till your score increases for a promotion or a new job.
Living on Rent
Living on rent is similar to a loan in many ways. This is because you live in someone else’s living space with a promise of paying a fixed amount on time. Many landlords will evaluate your credit score to determine whether you can afford the rent. If your credit score is low, you might have trouble finding a living space in a safe neighborhood. This drastically impacts your lifestyle because people judge you based on where you live.
Buying a New Cell Phone
Your credit score won’t likely come into play if you outright buy a cell phone. But the latest cell phones are well over $1000. Many Australians either lease a cell phone (if they plan to upgrade regularly) or make monthly payments by making a small down payment. Whatever the case, your carrier will evaluate your credit score before leasing you a new device.
Your credit score defines where you live, what car your drive and which cell phone you own. Therefore, credit scores have a strong hold on your lifestyle. Moreover, you’ll face difficulties finding a job if your credit score is low. Therefore, borrow less and pay promptly if you want to succeed in life. Otherwise, you might be stuck with your blood-sucking employer driving to work in an old car. Nevertheless, there are several ways of improving your credit score. But the best way to stay financially fit is not to let your score drop in the first place.