Why is My Credit So Important?
Like it or not, credit is an important part of everyday life. If you want to have a successful financial life, understanding and managing your credit is a requirement.
You need to understand and use credit if you want to…
- Buy a house
- Buy or lease a car
- Get better rates on insurance
- And much, much more.
You can also expect potential landlords to run what’s called a “credit check” as part of an apartment application.
Many employers will also review a job applicant’s credit report when evaluating candidates before they decide to hire them or not.
Even insurance and cell phone companies factor in credit scores to help determine whether to issue insurance coverage or begin a new contract for phone service—and to help set the terms.1
Whether it’s a new installment loan, a new auto lease or a new credit card, it’s not just about getting initial approval; having a “good credit” score can make the road ahead a lot smoother.
Clearly, credit is important if you want to get approved to make certain purchases, but there’s more to it than just that. If you are approved for those major purchases, your credit will determine the kinds of interest rates you’ll be charged. If you have good credit, you’ll save money on interest. If you have bad credit, lenders and creditors will charge you much higher-interest rates, which can make it even more difficult to get ahead.
Even if your application for that loan, lease or new credit card is approved, your credit can have a big impact on the terms of the agreement. You may be offered less money than you need, be charged a much higher-interest rate, or be required to repay the loan in a shorter amount of time. Likewise, a credit card company may offer you a card with a low credit limit but very high interest rate. And remember the landlord scenario? You might still get the apartment—but you might also be asked to pay a much higher security deposit.1
In each of these examples, the decision-makers are trying to balance out the risk of loaning you money, issuing you credit, or approving you as a renter by requiring higher-interest fees or deposits to offset their losses if you don’t hold up your end of the bargain. This means that you’ll end up paying more for the same services than someone with stronger credit—and we want to keep that from happening.
Table of Contents:
- Workbook Objectives
- Part I: Credit
- What does Your Credit Mean?
- Why is My Credit So Important?
- Let’s Make it Personal
- Expert Advice
- Credit Cards
- Who Offers Credit Cards?
- Credit Reflections: Credit
- Different Types of Credit
- Common Credit Mistakes
- Credit Card Tips
- Credit Quiz
- Part II: Understanding Your Credit Report
- Part III: Understanding Your Credit Score
- About The Experts
- About OppLoans
- Works Cited
- Part I: Credit