Why Is It Important to Have a Good Credit Score?

Your credit score is only one part of your overall credit picture, but it plays an important role in your personal finances. Keeping your credit score in good shape can help you keep your finances on track.

Definition

Your FICO credit score is a number between 300 and 850. It is determined through a statistical analysis of five factors regarding your payment history and credit use.

Getting Good Credit Terms

Companies use your credit score as a predictor of your ability to pay back a loan in a timely manner. For this reason, consumers with higher scores will be offered better terms such as lower interest rates, fewer fees or flexible repayment periods.

Getting Credit

By establishing a good credit score, you ensure that you can get a loan or a line of credit. You won't have to worry about shopping around trying to get a bank to accept your application.

Employment

Many employers are beginning to use credit scores and records to help them assess the overall suitability of a candidate. This is a more common for individuals who would handle money regularly or have access to company credit accounts.

Housing

While your credit score plays a large part in determining eligibility and terms for a mortgage, many people don't realize that it can also affect your ability to find a residence to rent. If you have a bad credit score, many rental agents or complexes will require that you obtain a co-signer.

Resources

• Your Credit Scores