Credit scores are something everyone has on their record, young and old alike. Even if you’ve never owned a credit card or taken out a loan, such as someone just starting out into independence as an adult, you’ll still have one! Whilst it’s going to be on the low side, but still in the green, it’s a defining part of your finance record that can be improved or lowered. So seeing as credit scores matter to people who don’t even need credit scores, there’s got to be something to them that makes them often the be all end all of the credit process? Here are a couple reasons why they matter so much.
They’re Simply a Good Record
It’s a good reference point for both you and a credit lender, as you can quickly and easily look up your history, and see where you’re going wrong and right. It can be a switch in making sure you change your lifestyle choices, so don’t let yourself think of a credit score as always being on the negative side of the finance equation.
Credit scores only dictate your financial history in terms of spending and loaning, and any other details about your life are not included. People can’t find out everything about you from just looking at a credit score, and thus that makes them a pretty safe record at the same time!
A lot of the time checking your credit score seems like a bad thing to do, but honestly, it does not affect how your score is presented. Both soft and hard inquiries exist, and unless a company is checking to see whether they should lend to you, only soft inquiries will exist on your record. And those are not bad!
Because Bad Credit is a Predictor
Bad credit seems like a bit of a limbo in the finance world, but honestly, whilst it’s of course not as good as good credit, it’s better than no credit at all! For someone to take you on as a borrower, you need to have a history that lenders can look into. Any kind of lender will consider this, so it is hard to find a loaning option that will ignore your credit score and take you at face value. Would you do it if you could not depend on repayment?
It doesn’t all have to be up to you however, as the world of finance can be unreliable, and often you can have bad credit for reasons that don’t apply to you anymore. For example, if you have taken out some personal loans in the past, and they have not been cleared from your score even though you have paid them off, they can seriously affect how high a rating you have.
Just dipping into the world of credit scores, we can see that there are some advantages to them. Do not consider a score as there to catch you out, use it to better your habits and improve your chances of staying on your feet.