So, you think a credit score is just a number.
Wait until you go to purchase a home and need a loan for it.
Credit scores are a representation of your credit history and are depicted with a three-digit number, between 301 and 850. While it is just a number, it can affect a number of your life goals, especially the ones that involve you borrowing money from a lending institution. Since a credit score is taken as an indication of creditworthiness by lenders, you need to have a good credit score to be able to afford the things you are planning for yourself in the future. With a good credit score, lenders will not have a problem with lending you money as they will be confident that you will pay them back on time.
The higher your credit score, the more trustworthy you will appear to the lenders. You are likely to face problems getting loans or credit if you have a lower credit score. While a credit score is mostly linked with big purchases, the truth is that they also affect whether you are able to rent an apartment or not. In fact, simple life decisions such as who may be willing to date you may also be impacted if you have a bad credit score.
Sounds bad, doesn’t it?
It is because of all these reasons that financial experts tell you to maintain a good credit report as it can affect a number of your life decisions. With a good credit score and good credit history, things will be much easier for you in the future if you need to borrow money from a lending institution.
Credit Score Influences Mortgage Interest Rate
When you see interest rates advertised anywhere for a loan, this is what these lending institutions are offering to the people with high credit score. Lenders never advertise and promote their average interest rates or the ones they offer to the people with poor credit because these are generally much higher than the normal.
If your credit card score is a little banged up from all the bills you did not pay the way they were supposed to be paid, or you are not able to manage the easy to get credit that millions of other consumers can, then prepare for a very different interest rate than what is generally advertised. Take “very different” as a code for more expensive as the interest rates will be much higher than what is offered to a normal client.
While the lending institutions may look like bad guys here, they are actually not. All they are trying to do is secure themselves against the high risk they are taking for lending money to someone who doesn’t have a good credit history. This is called risk-based pricing that has been an industry norm for as long as the concept of credit history and credit scores has been around. Risk-based pricing occurs when the different consumers are offered different interest rates or different loan terms based on the estimated risk that the consumer may fail to pay back their borrowed amount of money.
Simply put, the lenders will offer you a higher interest rate if they view you as a high-risk borrower. It can be because of many factors. These include declaring bankruptcy, losing a job or being behind on several payments on a mortgage. On the other hand, they will offer a lower interest rate on the same amount if they view you as a low-risk borrower, as they have a good credit score.
If your credit score is not perfect, you will also end up paying much more over the life of a loan, which is going to decrease your overall profit.
What Needs to be Done?
So, you have a bad credit score.
Does that mean that all the borrowing options are closed for you?
While different financial institutions have different rules for those in different situations, you will most likely get a loan but at a much higher interest rate than you were expecting. Insurance companies also tend to increase premiums for the people who have low credit scores. What you can do in this situation is improve your credit score. It cannot be done overnight, but it certainly is possible if you take it one step at a time.
Consult with a Credit Repair Company
There are many credit repair companies out there that offer credit repair services. They can help you improve your credit score by finding out any anomalies and setting you up in the right direction. It is important to only choose legal credit repair companies as you don’t want to get into another issue. Your Rocket Credit is one of the best credit repair companies that offer full-fledge credit repair services.
Your Rocket Credit
Credit repair is something very serious and you cannot let amateurs handle such an important task. Your Rocket Credit has a team of highly skilled and professional credit repair experts who have been in the industry for many years now. If you are looking for an expert and experienced team to handle your credit repairs, Your Rocket Credit is a great choice. Know what steps to implement to improve your situation and where to start with the help of the experts ready to cater to your needs. Get guidance on what ‘levers to pull’ that can change your next conversation with your bank or insurance company so that you can get the money you want without having to pay a huge interest rate.