How a good credit score improves your chances of securing credit
It has various other benefits, too.
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A good credit score means:
- You are financially responsible
- You have better chances of securing loans and mortgages
- You can avail of affordable life insurance premiums
- You can get credit at lower interest rates
What is a Credit Score?
Your credit score is the product of your loan repayment history, existing loan accounts, credit utilization, loan application/rejections, and late payment fees. You can see this on your credit report from any of the major credit bureaus like Equifax, Experian, or TransUnion.
Why is a Credit Score Important?
The summary of this information generally defines your financial creditworthiness that affects your chances of securing affordable insurance premiums, as well as loans, jobs, and homes. Almost all lenders and insurers will check your credit score when evaluating your applications. A low score may portray you as a high-risk borrower.
In addition, too many loan applications and rejections within a short span of time won’t make you look good, either. At the same time, high credit utilization indicates that you spend a lot of your income on repaying debt – something that also won’t look good on loan applications.
Furthermore, if you keep missing loan repayment deadlines, your creditors might report you to credit bureaus, and this could tank your credit score by several points as well. These negative entries could stay on your credit report for years and will be accessible to lenders whenever you apply for a loan.
Protect Your Credit Rep From Identity Theft
There are bigger problems, too. Identity theft is currently running rampant, particularly during the pandemic, with people using other people’s government IDs to open loan accounts. A Federal Trade Commission’s report shows that identity theft actually rose from 3.3 million in 2019 to an estimated 4.7 million in 2020.
Hence, it stands to reason that checking your credit score on a regular basis would be vital to protect your hard-earned credit rep.
How to Check Your Credit Score for Free
The Credit Karma app lets you regularly check your updated credit reports from Equifax and TransUnion completely free of charge. Their free credit monitoring services can also give you real-time updates in case of new hard inquiries for loans, changes to your personal details, new credit card or loan accounts, unrecognizable late payment fees, and incorrect entries.