Banking

5 Reasons Why You Need a Credit Score

5 Reasons Why You Need a Credit Score

If you’re one of the people who are anti-credit score or just plain afraid of credit, you might be hurting yourself financially in the long run.These days,employers, mortgage lenders and landlords are looking for a good credit report, so you don’t want to have nothing to show them.

In 2015, there were 26 million people who were “credit invisible”,meaning they had no credit history -and 19 million people who were “un-scorable,” this was according to the Consumer Financial Protection Bureau. This basically means they had insufficient credit history or a lack of recent credit history.

Below are three minimum requirements to generate a FICO score

1.You need to have a credit file which doesn’t suggest you’re deceased.

2.You should have at least one account open for six months or more.

3.You should have at least one account that been reported to the credit bureaus.

If you  are one of the people who have zero or limited credit, you can satisfy point number 2 above”at least one account” requirement with a simple account like credit card.

Sometimes,choosing to avoid credit can put you in a compromised position.

Below are 5 Reasons why you need a credit score:
1.Buying a Home

Without you FICO Score,It could be difficult to find a mortgage lender. It takes time to earn a good credit score, and the longer you wait to start working on it, the more interest you’ll pay on a mortgage.You can visit http://myFICO.com to check your credit score.

2.Getting a Credit Card

If you’re one of the anti-credit card crowd, It is understandable. You do worry about debt. I’m anti-credit card debt too.However, as long as you can use a credit card responsibly, you won’t swim into debt. The main key here is to make sure you keep low balances and pay your bills in full by the due dates.

A credit card is important to have for emergencies . Using a credit card is the safest way to online shopping. Yes, a debit card can be used online, but why would one want to do that? If your account number gets stolen, your account can be blown before you realize what’s happened.

It’s true, you may get all of your money back. But in the meantime, how are you going to pay your bills while waiting for the bank to sort out this issue?Think about it.

While credit cards can help you develop a credit history, they make it easy to accumulate debt.Like I said before,the key is to use your credit card  responsibly (remember it’s important for emergencies).

3.Renting an Apartment

When you want to rent a flat or apartment, some landlords usually do a background check to check your credit report.Sometimes they don’t even have to request your credit score, they can tell from your credit report if you’re likely to be a tenant who will pay their rent on time.

If you’re in a situation where the landlord thinks you won’t be able to pay your rent on time,don’t worry too much.There are ways to get around this, but it cost you some money. You can consider paying a few months’ rent as security deposit to show your good faith. But with a good credit score, you will get by with one month’s rent as a deposit.

4.Getting Your Next Job

Honestly, your potential employers will not be looking at your credit score. But,they might look at your credit report. And if you don’t have a credit score, you’ll have a bare credit report.

When employers see that you can use credit responsibly,this sends a message that you’ll be responsible at work, too.Yes,this might seem unfair. But it’s reality you have to deal with.

This is usually less of an issue for new graduates who have only begun to build credit.

 5.Refinancing Student Loans
 If you’re already repaying your student loans, it’s your chance to build a credit score.As soon as you develop a good credit score, you can consolidate your student loans and maybe get a better interest rate than what you currently have.

So,,in the long run, you’ll be paying less interest on the loans. Never underestimate the power of a good credit score when you have student loan debts. It can definitely help you in terms of creating more room in your budget for savings.

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